Three years ago, Chris Hill was working as an associate at the mid-market buyout shop Lake Capital in Chicago, when he decided that, rather focus on online marketing businesses for his bosses, he’d quit to start his own.
Hill’s first idea was PerkSpot, which has been managing employee discount programs for clients including Fortune 500 companies, state and local governments, and other affinity groups, since 2006.
More recently, Hill jumped on a newer trend, adding a direct-to-consumer offering called CouponTweet that essentially scours Twitter for coupons, then invites users to search them in organized fashion at its site. (For example, at the site, which emerged from beta a few days ago, you’ll currently find direct links to Ann Taylor, Old Navy, and Sears under the “apparel” category.) The site also includes a Digg-like feature that lets users vote a deal to the top of the page, or cast it down to the bottom.
I called Hill in Chicago yesterday. We talked about why he’d jump into an increasingly crowded category, and why he thinks he might be able to raise a few million dollars to compete in it.
Sounds like PerkSpot works. Why decide to do something more consumer facing?I have a personal obsession with Twitter and I sort or realized last fall that it could be a way to do organized searches for coupons.
I hear a lot about the power of Twitter as a distribution platform, but hundreds of coupons sites have emerged in the past year. How big a concern is that for you as you come out of beta?
It’s definitely a concern. As you pointed out in a story last week, coupon sites are among the fastest sites [in terms of traffic] next to job boards.
But unlike a lot of these one- and two-man shops out there, we already know the space because of our Perk service, and in addition to proactively finding coupons and bringing them to customers, we’re negotiating proprietary discounts, which we can do because of our existing relationships. In fact, we can get cream-of-the-crop discounts because we can offer them through both [PerkSpot sites and CouponTweet]. We’ve also developed a technology that pulls relevant, real-time coupons from Twitter onto our coupon marketplace almost instantaneously.
And a community feature, that let’s people vote on coupons. How important is that social component, in your view?
Very. Social networks are CouponTweet’s bread and butter; people are sharing, commenting — all through Twitter. But it also doesn’t hurt to be associated with Twitter [specifically] given that it’s in the news every day.
Do you have any traffic yet?
We have some; the site is already producing revenue. We made an investment in organic search. But we just had a soft launch this past weekend. We’ll register soon with search engines.
And what can you tell us about your margins?
They’re really all over the board. Dell isn’t going to have a lot of leeway in terms of margin; we might see 1 to 3 percent [through a coupon sale]. Then you have high margin businesses like jewelers, where a 20 percent to 30 percent margin isn’t unheard of.
A lot of coupon programs work through affiliate programs, and because of those layers, it’s hard for a Website publisher to be successful. We have the advantage of going direct to retailers.
How many, though? Of the coupons at your site, how many were actively negotiated by your company?
We have tens of thousands of relationships, though a lot will be less direct than others. I’d say we actively speak with a couple hundred merchants.
You say “we.” How many people do you employ?
We have 12 full-time employees who will increasingly split their time across a number of things. We have a laundry list of initiatives.
Is that why you’re thinking of raising funding?
We’re still trying to determine if we should bring in funding. We bootstrapped Perk, and these are fairly cash-efficient businesses, so we don’t have to do it. Really, we’ve only reached out to one or two people; we’re still trying to finalize executive summary. We just figured it’s an option worth exploring, as long as investors are looking at the industry.
And why do you think $2 million to $3 million is the right range?
Honestly, anything much lower than that probably isn’t going to hold my interest because it’d pointless, given our cash flows.