Last week, I had the pleasure of speaking with Jeff Bussgang, co-founder, president and COO of Upromise. UPromise was acquired by Sallie Mae in 2006.
UPromise is a loyalty program where participating retailers deposit 1% of the end-consumers spending into a designated college savings account. The amount deposited can be used to pay off existing school loans or to pay for future loans. UPromise's business model was to reach out to students on college campuses, and encourage them to ask their parents to shop at participating retailers, thus saving/earning money for college. This allowed UPromise to drive business to retailers, and they were in turn paid by retailers for this.
Jeff started out by saying that when he and his co-founder Michael Bronner launched UPromise, it was around a very unique set of circumstances.
- Both he and Bronner were experienced entrepreneurs who had exited their previous ventures successfully.
- The company was launched in 2000, when the internet bubble was still intact.
- These two facts helped them raise $34 Million without having a single customer.
- Bronner had extensive contacts in the retail industry, which made it relatively very easy to get their foot in the door, and land the first few customers.
Their experience, branded VC backing, and Bronner's contacts earned them credibility with retailers and once the first few retailers signed up, it was an easier task approaching everyone else. He also mentioned a couple of other interesting points:
- When they approached retailers, they had a CMO with credibility, who had executed a similar strategy before.
- They approached retailers with a comprehensive marketing plan and a branding document.
- The typical time between first contact to contract with a retailer averaged 9 to 12 months.
I found it very interesting when Jeff commented that he was not sure he could found such a company in today's climate and be as successful. It goes to show entrepreneurship is as much about luck as it is about sweat and guts.