Lessons From Serial Entrepreneur Brian Wiegand, A WI Exit Master
A lot of entrepreneurs would kill to have Brian Wiegand’s startup success rate.
Three of his tech companies—BizFilings, NameProtect, and Jellyfish—achieved exits totaling $87 million, and only one—Alice—bit the dust. (Let’s give another one of his potential ventures, Edine.com, a grade of “incomplete” because it never officially launched, as he quickly pivoted to work on BizFilings.)
Now, Wiegand—one of Wisconsin’s few decorated serial entrepreneurs in tech—is leading another promising startup, Hopster. The Middleton, WI-based company provides coupons that can increase in value the more that consumers engage with a brand, say by liking a Facebook page, signing up for a newsletter, or watching a marketing video. Founded in 2012, Hopster has raised $4 million from investors, grown to 16 employees, and accumulated more than 2.5 million users, Wiegand says.
The Wisconsin native enjoys coming up with disruptive ideas and serving customers, but says that the most thrilling part of being an entrepreneur is building his startups to an acquisition. Several colleagues have earned six-figure payouts from his past exits, and a few became millionaires, he says.
“My favorite thing in the whole wide world is seeing people that come from corporate America or come out of college and they get a job, and you give them [stock] options, and they make this big chunk at the end,” Wiegand says.
After graduating from University of Wisconsin-Madison in 1994 with an economics degree, Wiegand (pictured left) moved to Connecticut for a job with FactSet Research Systems in New York City. He caught the entrepreneur bug and started working on Edine, intended as a restaurant delivery service that combined faxes and the Web, he says. But Wiegand struggled to get it off the ground partly because he knew little about the legal paperwork and logistics involved in starting companies. Seeing another opening for a business, he discarded Edine and in 1996 founded BizFilings.com, a website for incorporating companies, with just $5,000. He later moved the operation to Madison.
As the Internet surged in the late 1990s, BizFilings was helping 100 businesses incorporate everyday, Wiegand says. The company sold for an undisclosed amount in 2002 to Dutch publishing firm Wolters Kluwer.
He co-founded his next startup, NameProtect.com, in 1997 with Mark McGuire—forming one of Wisconsin’s most prolific entrepreneurial duos in recent memory. They raised $4 million from investors for NameProtect, a search engine that crawled the Web for trademark and intellectual property infringement, and sold the company for an undisclosed amount in 2007 to Corporation Services Company.
McGuire and Wiegand teamed up again in 2006 for Jellyfish, which developed a shopping search engine with the philosophy that consumers should get some benefit from advertisements, Wiegand says. As brands spent more money to move a product higher in Jellyfish’s search results, buyers would receive some cash back—essentially creating a marketplace in which product discounts were a function of advertising dollars.
“I hate advertising. It’s interruptive,” Wiegand explains. “Hopster abides by the same philosophy of giving back advertising dollars to the user or some value back to us. If we’re going to be interrupted with advertising, give us some value.”
It took less than 18 months for Jellyfish to lure a suitor. Microsoft (NASDAQ: MSFT) acquired the company for a reported $50 million in October 2007, and the Middleton firm’s platform provided part of the framework for Microsoft Bing Shopping. (Microsoft ended up dropping Jellyfish’s cash-back feature in favor of a points reward system, Wiegand says.)
“It was a really tumultuous time for them to try to fit into the world with Google,” Wiegand says. “We got caught in that whirlwind of excitement, and it resulted in a nice exit for us.”
Wiegand and McGuire’s winning streak ended with their next venture, Alice.com, an online marketplace for selling household goods like toilet paper and toothpaste directly to consumers. Alice raised more than $20 million in venture capital and quickly grew to $12 million in annual revenue, Wiegand says.
The startup’s primary goal, Wiegand says, was to help brands like Unilever and Johnson & Johnson create direct relationships with end customers, something that’s difficult to cultivate in a consumer-goods economy dominated by supermarket chains.
Alice also provided an opportunity for brands to control pricing of their products on the site, theoretically selling for less than at retail. That could have meant competition for retailers like Walmart and Target that sell their cheaper private-label consumer goods on store shelves right next to the brand-name equivalents.
But this disruptive shift never really materialized, according to Wiegand. Clients started saying they would need to treat Alice like any brick-and-mortar retailer, meaning it would have to buy the goods, rather than simply list them online as a middleman, a la eBay (minus the auctioning), he says.
“The brands, for some unknown reason, didn’t capitalize on the market opportunity they had, and started to force this down a traditional ecommerce retail model,” Wiegand says.
After a few years, Alice shut down—proving that “you can’t be perfect” in entrepreneurship, Wiegand says.
“It’s a really fine line between success and failure,” Wiegand says. “I felt like we executed really well.”
After Alice, Wiegand and McGuire went their separate ways, but perhaps not forever. While eating breakfast together recently, Wiegand says McGuire told him he “absolutely” would join forces on another startup. But right now, McGuire is also busy running his own venture, the private social network Nextt, which has raised $700,000 from investors, according to SEC filings. (Wiegand and McGuire have invested in each other’s startups.)
“I blend really well with him. He’s a great guy,” Wiegand says. “But I think he wanted to give it a shot to try on his own. I really respected that.”
Meanwhile, with Hopster, Wiegand is trying to shake up a coupon industry that has stayed largely static over the past century—92 percent of the $150 billion market is still in paper form, he says.
Hopster’s competitors include Coupons.com (NYSE: COUP), a provider of print-at-home coupons. Hopster takes things a step further with dynamic coupons that provide incentive for consumers to interact with brands. Otherwise, Wiegand points out, the average consumer probably wouldn’t join a ketchup manufacturer’s mailing list or follow their cereal maker’s Twitter feed.
“These are the largest advertisers in the world, and they’re trying to work one-on-one with us,” Wiegand says.
But therein lies another inherent flaw in the newspaper clippings system: brands have virtually no clue who is cutting out and using each of the nearly 1 billion coupons being distributed, on average, each day, Wiegand says.
“It’s like dropping money out from the sky,” he says. “Think about a model where you’re spending billons of dollars and have no idea who’s getting that value.”
With Hopster, consumers create a profile on the site, and it tracks each user’s purchases with the personalized discounts, which can be redeemed through either printable coupons or syncing the discount with a retailer’s loyalty card, Wiegand says. Individual user data can also be shared with brands if the user agrees to it.
“Now they can build a relationship with you,” Wiegand says. “Then they can do targeted advertising to you. That’s the holy grail of advertising.”
Wiegand thinks Hopster’s model—brands essentially paying consumers for their data—is the future for balancing privacy concerns with targeted online advertising.
One of the startup’s biggest challenges, of course, is making Hopster a household name and attracting a critical mass of consumers. Its strategy for achieving that involves striking deals with clients for exclusive coupons and having Hopster power the clients’ branded coupons on their own websites and social media pages, so the corporations basically spend their advertising dollars to drive Hopster users, Wiegand says. Hopster has spent virtually nothing on advertising, he adds.
“I’m in the business of giving away money, so in a connected, viral world, that spreads very quickly,” Wiegand says.
So, does Wiegand have a secret sauce for building successful startups? Not exactly, although he says it’s less about the idea (“ideas are cheap”), and more about finding a “disruptive angle” in a marketplace, raising money, hiring the right people, and executing. (He admits the execution and fundraising are made easier with experience and a proven track record.)
But Wiegand’s white whale is an exit that eclipses $100 million, he says. Sure, he could’ve held out for bigger deals with his past companies, but it’s difficult to turn down a good offer because who knows if another one will come around, he says.
Attaining that big, national headline-grabbing exit was one of the goals he set for Hopster, he says.
“Whether we get there or not, I don’t know,” Wiegand says. And if he does another startup, “that would be the reason to do it.”