BatchBlue: Non-traditional Startup in Tradition-Rich Rhode Island

Warren, Rhode Island is a place I dare say not many people outside The Ocean State have heard of at all, never mind heard of as the home of a Web 2.0 “virtual” company. But, insofar as BatchBlue Software can be said to have a physical home, Warren is it. And The Coffee Depot on Main St. qualifies about as well as any other place as its “offices.” So it was quite appropriate that I met there with Co-founder and President Pam O’Hara and User Experience Designer Adam Darowski to learn about BatchBlue and how it got off the ground.

BatchBlue’s product is called BatchBook. It’s a web-hosted small business CRM tool. Its customers are typically small information service firms like lawyers, web designers, venture capitalists, financial advisers or real-estate agencies. These are client-oriented firms as opposed to retail or product-oriented firms with salespeople, inventory, manufacturing, logistics, point-of-sale and supply chain concerns. It helps its users organize the contacts, tasks and information that are their stock-in-trade, emphasizing simplicity and affordability.

My initial reaction to reading the product description on the company web site was, “This seems like a crowded product space. How are they differentiating themselves?” But according to Pam O’Hara, the idea for the company came out of her and co-founder Michelle Riggen-Ransom’s discovery of an empty niche in the CRM product landscape.

The two met through common community work in Warren and found they both worked as field consultants for companies elsewhere in the country. After commiserating about the difficulties of working alone and remotely, they decided in February of 2006 to throw in together and start finding consulting work locally.

One of their clients was a market research firm that was struggling with contact and document management. They surveyed the market to try to find a suitable solution off the shelf, but came up empty. Products were either point solutions that didn’t address all the needs, or were overly broad, complex, and oriented towards much larger firms with other concerns. Seeing an opportunity, they decided to try to develop a product to fill that void.

It’s here where BatchBlue shows its “Startup 2.0” colors. Rather than formulating a highly extrapolated business plan, detailed product specs and going after traditional venture capital, the founders kept things small, took on developers slowly, invested their own money and some from personal acquaintances. Their plan was to fund the company for 3 years. Today they are 2 years into the plan and there are still only 3 principal investors, O’Hara being one. This kept the team lightweight and agile and allowed O’Hara to concentrate on finding the right product definition by trial with real customers rather than defending a cast-in-concrete but highly speculative plan to investors.

O’Hara and Darowsky credited the Providence Geeks meetups for helping them find their “real people” test customers. It’s a Rhode Island cliché that you’re never more than one degree of separation from anyone else in the state. That closeness of the Geek techies to their “normal people” relatives and friends in small businesses brought customers to BatchBlue by personal recommendation. O’Hara also pointed out that being outside the ubiquitously technoid environment of Silicon Valley made it easier to find non-technical people that were the company’s target market.

After some iterations on product prototypes with their test group, and one serious redesign of the implementation, they launched their beta at DEMO Fall 2007. The fact that they were self-funded consistently surprised both the other startups and the investment types that they talked to during the course of the show. And just last week, on February 7, 2008 (“at four in the morning,” Darowsky was quick to point out), BatchBlue came out of beta and opened for business.

At this point they have approximately 400 business accounts. The vast majority are in the 1-2 user camp. Their largest user, to the best of their recollection has 10 employee users, so they are truly hitting the market they sought to serve. Their pricing is in tiers with single user accounts free, but limited to 200 contacts, 2-3 users at $9.95/month, on up to a 16-40 user tier at $39.95/month.

I asked if potential customers were concerned about security and availability. When you store your precious data offsite, it’s an unnerving thought that it might become inaccessible. O’Hara responded that indeed, it was the number one concern of all potential customers. The fact that they are dealing with small businesses, though, turns this concern into a positive. They have a very convincing set of facts about why it’s actually safer for a small business to run in a hosted environment, chief among them that the hosting service used by BatchBlue (RackSpace) has extensive and costly redundancy and backup built into every aspect of their server farm, the cost of which is distributed over all the users. Also, they have the expertise to run a highly secure and redundant operation, something completely beyond a small business to afford.

I wondered if they were planning to go out for another round of capital to finance a build-out, now that they’re up and running. But since they operate on paying customers instead of advertising revenue, they are planning to use increased revenue to finance what is a relatively modest incremental expense for server horsepower, storage and bandwidth.

This last discussion about financing led us to what I found to be BatchBlue’s truly distinguishing characteristic. O’Hara, her co-founder and 5 employees aren’t in this to go public to an inflated valuation, or to groom their balance sheet to look right for a buy-out by Google or Microsoft. “We started this business to support our lifestyle and our family commitments”, said O’Hara. Unlike traditionally financed startups, the people at BatchBlue seem to care not a whit about exit strategies and cash-out but rather about creating a sustainable business that works for them and their families. What a concept!