Are users willing to check into local businesses with another, mobile check-in product? That's what Los Angeles-based MergeLocal (www.mergelocal.com) is looking to find out, by offering up points which can be converted to real cash, when users check into local businesses. We caught up with co-founder Michael Wong, who told us about how the company is looking to change the model for local check-ins, and also help businesses with getting the word out about their services.
What is MergeLocal?
Michael Wong: If you're familiar with Foursquare, what we're doing is a check-in based service, which allows a user to check into their favorite places, and earn points, which they can redeem for cash through PayPal. It helps local businesses, events, and brands to promote themselves, based on the location of their users. If you look at a typical user, they have 120 to 200 friends on Facebook, 100 to 150 friends on Twitter, so a business can pay a user a specific amount to promote their businesses with each of their check-ins.
What's your background, and how did you decide to start the company?
Michael Wong: I was previously CTO of an agency called Breakthrough Ads. My cofounder, Steven Elliott, was CTO of a company doing artificial intelligence and automated chat technology. My other co-founder, Rusty Jenkins, was also with that company, doing sales. We had worked together for six years before starting MergeLocal, which came about on the golf course. We had gone our ways, and after we left UpSellit and were golfing, we decided that instead of being part of a lifestyle business we wanted to start our own, and help local businesses market themselves.
There's an awful lot of check-in sites out there. Why would someone want to use your site?
Michael Wong: The big reason is really cash. We want to be able to reward people with monetary value, rather than badges. In terms of the big thing for businesses going after the local market, we're giving away 20 points for every single business in the system, so there isn't a chicken and egg problem. We now have around 500,000 businesses, and 1 million by the end of the week, where people can check in and get points. For local businesses, we're also giving them free mobile web sites, and working on other relationships. Since we started our free site last week, we've organically grown faster than we ever thought we would. On average, not including our internal friends, every user who joins the site is inviting four new friends, and we haven't done any marketing except a press release. We're seeing all of that growth from friend invites, with at least one of those four joining so far.
Can you talk about how your company is funded?
Michael Wong: We're with StartEngine, and have received a small amount of seed funding from them. We're also funding it out of pocket. We will be opening up a a round of funding soon, as soon as we have some metrics and have been live in the market, and hope to raise some money and capital in the next thirty days.
You mention you're part of StartEngine. What's the best part of the accelerator experience for you?
Michael Wong: The best part are the connections. We've gone through this before in startup companies and pushing things forward. We have been part of two different startups, working together, as first employees. The big thing for us has been those connections to investors and mentors. For example, Chris Louvion, the CTO of Citygrid, is one of our advisors, and Greg Kim of Savings.com is also an advisor. They've ben invaluable, and given us the right feedback and sent us down the right path. The feedback, mentors, and connections are amazing.
What's the worst part of an accelerator?
Michael Wong: The worse part is lack of sleep. Other than that, I don't really see a downside for a company that is trying to raise money, if they are close to product. From the companies around us and others we've seen, the one thing I'd always tell them, is that it's easy to not focus on the product, and just focus on earning an investment, but you have to do both. You have to get the product out, because it's very important to show traction if you want to get any cash from investors.
How are you signing up local businesses, and how do you think that will scale?
Michael Wong: That's a really good question. What we've done so far, is we've built out our own CRM, and we've applied one person so far--Rusty, our President--to calling and onboarding businesses based on our freemium model. All of the businesses we've called have expressed the need for a mobile web site, particularly as many of them have Flash websites which are not compatible with mobile phones. We've put together a process for putting together a mobile site which is no-touch for us, where they can add their information, choose different styles to put up, and connect with their website. As we've built this relationship with them, we let them see the mobile and social metrics, and make it so that they're able to create a campaign. We've proven the model using our CRM, and that we can scale that to identify early adopters on the business side.
We actually know a lot about this, since we started in 2010 as a QR-code based, loyalty program. We pushed on that for nine month, trying to create a locally based QR code business. We signed up 150 businesses, but we found that retention was low, with only about fifty to sixty percent of businesses a month. Trying to scale that was impossible. That's why we pivoted into this market, and learned a lot in onboarding local businesses, and how to leverage a phone-based sales force to grow. It was actually an article by William Hsu at Muckerlab which caused us to pivot. He put out a blog article and spreadsheet which outlined if you were going to be able to scale your sales team, or if something was not scalable. Based on his number, we decided to pivot.