Around this time last year, I wrote several posts on emerging entrepreneurs and their respective companies.  Since then, they’ve all met with the same financial crisis gripping everything from our stock markets to our labor and housing markets.  I’ve been thinking about writing a follow up post and will do so.  Right now, I want to talk about a new story on Enter Venture — BiggerPockets.

BiggerPockets is a real estate investing network with a story that demonstrates the power of a strong community in the face of crisis and roadblocks.  BiggerPockets is a site for all things real estate.  You can find the latest advice from their blog posts or solicit advice on an active group of forums.  If you’re looking for something a bit more hands on, you can review their listings for your next real estate investment or their events  for classes, webinars, and group meetups.

Joshua Dorkin, the founder and one of three employees at BiggerPockets, was kind enough to share the story of how it all came to be.

Building organically

Getting to where BiggerPockets is now was no straight or intended path.  Much like craigslist.org, the site grew out of a personal hobby that grew beyond the person. The site began while Josh was learning real estate investing.  He used the site to collect resources, share experiences, and obtain feedback.  It was, however, a mere side project to his full-time job teaching web design and journalism, and pursuing (not just writing about) his budding real estate investment career.

As he continued to contribute, though, the site began to grow.  He plowed revenues back into the business and, very quickly, it developed into something larger than his own resource.  Along the way, the site also became a central resource for other real estate investors, and with this new audience, Josh sought ways to build something that could fully support these other investors.  It was also around this time that MySpace began to take off.  Josh, witnessing the rise and potential of social networking, realized he had an opportunity to create his own niche, real estate community around BiggerPockets and sought out an outsourcing firm to do just that.

Navigating bumps in the road

The team he hired, though, would get in the way of those plans.  He spent months and thousands of dollars on an outsourcing firm, but what he received was a broken, disjointed site in return.  The code was trash, and he could do nothing but toss it aside and go back to the drawing board, back to growing organically.

Using regenerated revenues from the site, he hired another vendor, this time using oDesk. oDesk and this new vendor offered a greater level of transparency, video snapshots, reports, etc.  It helped him manage the project and ensure it was going in the right direction.  When there was a mistake or miscommunication, it was quickly recognized and resolved.  The project was now going in the right direction, the site would launch its new features, and eventually, BiggerPockets would find its first dedicated developer.

On top of development bumps, though, BiggerPockets had to contend with plummeting ad rates, much like the rest of the web.  To counteract this, the site focuses on consistent content creation, further cementing its status as a resource and helping fuel steady user growth.  What started as Josh’s resource now features 22 volunteers and 40,000 passionate members.

Enforcing community

Growing BiggerPockets from a hobby to a business required Josh to learn new skills in everything from online advertising and vendor selection to project management.  None of these skills, Josh says, was more important than learning how to manage a community.  How exactly do you run a forum?  How do you monitor content to ensure a level of trust amongst your members?

At BiggerPockets, the answer to those questions is a strict, even hardcore, adherence to a set of rules.  It’s sometimes controversial.  It rejects, and sometimes expels, power users looking to bend those rules, and it’s not always easy.  Controversial or not, though, the site avoids a far worse outcome — a site overcrowded by solicitations and sales pitches.   Take a quick browse through their forums and you’ll see an active, supportive (and sometimes salty) dialog.

That same trusting community now helps ensure its members’ own success.  People use the forums to save themselves from bad decisions or find investment mentors.  The site facilitates profitable business partnerships and helps those on the wrong side of bad deals.  In one case, the community even helped bring down a Ponzi scheme by offering authorities access investors who may have been caught up in it.

Without that sense of community and dedicated group of volunteers, BiggerPockets wouldn’t be what it is today — a place where tough love establishes a sense of trust.  It’s something other networks might want to try out for themselves. (You hear that, Craig?)

If your plans to start a company require an investor and you’ve never purchased a stock, please do so now. Start a portfolio, and even with small purchases of public company stock, you’ll better understand the role of your angel investor or venture capitalist. You’ll better understand what they’re looking for and what your business has to do in order to become a success.

Portfolio Rant

Around last fall, I started trading with an E*trade account to better understand other investors using Wikinvest.  Prior to that, I had spent some time positioning a 457 account, but nothing more than that. Just a few months into my time at Wikinvest, though, it was hard to not want to invest.  I’m constantly reading investment reports, finance blogs, news, and generally talking about the markets and investment ideas.  It was a perfect fit and, lucky for me, I decided to start my investment portfolio right around the time of one of the greatest stock market crashes ever.

Investing since Wall Street’s collapse in October (and then Geithner’s bobble in March) has its benefits.  With valuations seemingly at the lowest they’ve been in decades, it felt like a good time to be greedy (or as greedy one can be when purchasing 10-50 stocks at a time).

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Investing has since fascinated me.  I’m in awe of the thought that, for $9.82, I can own part of American Express (it certainly helps that their dividends offset some of my credit card interest too) or Tata Motors for $4.42.  Ownership can be addictive, and I certainly throughout some of the markets lows.

Since this is an entirely new portfolio of mine, I have a long horizon.  Unless we go into a 1990s Japan-like slide, I’m assuming that a monkey could make money with a long-term investment just after the Oct 08 to March 09 fall.  That said, I’m certainly not willing to count on that, and after markets rose this spring and summer, I’m now looking for quality companies.

I like a good, low debt-to-equity / high ROA / low P/E combo if it’s to make it into my portfolio.  From all the opportunities out there, I start with sectors and regions and work my way down to companies.  I stay away from retail in the U.S., but I embrace it in India and China.  I like companies that build things, or build things that are used to build things, or transport things, or dispose of the wreckage from buildings things.  I like financial institutions — a few of them at least, the ones I haven’t heard much about on television.  Before I invest in a company, I look at recent earnings reports, annual reports, investment reports, and read news associated with the company.

The Investment Portfolio as Venture Capital

It’s not long into this process that I realize what it must take for a VC to part ways with several million dollars of their and their client’s money for an unproven idea and company, all the while knowing they can only, maybe, get the initial investment back in three to five years.  If they’re incredibly good and lucky, they’ll get that investment back with interest.  It’s no wonder it’s hard to get money from a VC.

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I’ve found I have certain tendencies with my portfolio similar to a VC.  For my stable investment — the IRA — I’m less willing to risk an entire company’s collapse.  I focus on ETFs like ADRE or QQQQ that follow big emerging market and major technology companies, respectively.  On the other hand, I’ve come to think of my trading account as my “extra” savings where I can take chances.  It’s where I’m going to prove my investor worth.  I’m OK with it disappearing over night.  I’m willing to be risky with multiple small cap companies, looking for one explosive stock.  I spread those investments around; some work while others don’t.  I do what I can to be good and hope to get lucky.  Sometimes, it’s no wonder it’s so easy to get money from a VC.

Portfolios for Founders

The other part about running your own portfolio is — you learn to understand the levers for building your own business.  Create more value than you require.  Give away equity for cash; take on debt for cash.  Purchase people / space / machines.  Convince someone to give you more cash and continue the loop  It’s all there within your portfolio.  You expect management of your portfolio companies to control costs, increase their cash, and demonstrate health by increasing earnings, milestones, dividends, etc.  Management has to preach to employees and investors, alike, with probably a slightly different story for each.  It all sounds like start-up world to me (except those dividends, of course).

As an early founder, you’ll be stuck in the details of your business at all times.  Your investors won’t.  They’ll expect you to step back from the conversation about the misalignment of that button by 5px and figure out whether your market strategy is going to withstand this economy given your cash on hand.  They’ll want it in digestible figures and metrics.  Further, they’ll want you to put your thousands of hours a year into a half hour phone call and presentation.  They just want the basics — are you creating more value than you require?

It makes you understand both the weight of the founder and the risk a venture capital takes investing in a start-up.  Both parties are flying blind in this arrangement.  There’s no easily accessible “Sell” button like there is on my E*trade account, and a bankrupt start-up is worth even less than GM.  Investments are designed for a three to five year exit (at least) with only a hope and a prototype to go on.

Founders, it’s up to you to figure out the rest.  You should understand what your investors are going through (employees are investors too — but that requires another post).  Just remember to create more than you require.  Start from nothing and be willing to lose everything.  Create ownership.

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• Cheap equities are an opportunity for investors (telegraph.co.uk)
• Dipping your toe into international waters (money.cnn.com)

There are myriad ways for you to build traffic to your website.  At a high level, you can buy advertising.  You can create something sticky that people can’t stop using.  You can create something that plays nicely with search engines and win the SEO game.  You can become a social media star, build a popular blog for your website, or even (gasp) use offline promotions or advertising.

Beyond that, you can go deeper into your expertise.  Learn how to effectively target your ad campaigns, reduce your CPCs for your online ads, or find free ways of advertising your site.  Measure what your users use most, build human-friendly URLs, write keyword rich content.  Start your Twitter campaign, Friendfeed account, and Facebook account — then, link them all.  Now, take all of the various ways I’ve just described, throw in all of the techniques I’m missing, mix and match, and, well, you’ve got innumerable ways to build traffic.

Please, please, just don’t use the automated email request for a link exchange with other sites as a way of building traffic.  Anyone that’s ever run a barely popular website has seen one of these things:

Hi

My name is NAME. I’ve just visited your website
enterventure.com and I was wondering if you’d be interested in
exchanging links with my website. I can offer you a HOME PAGE link back
from my Business and Marketing website which is WEBSITE URL HERE
with page rank #.

As mentioned, your link would be placed on the site HOME PAGE, not on
any “links” pages which may be buried in the site somewhere. I’m sure
this exchange would be benefitial for both of our sites, helping
towards increasing our visibility in search engines.

If you are interested, please add the following information to your
website and kindly let me know when it’s ready. I’ll do the same for
you in less than 24 hours, otherwise you can delete my link from your
site.

I’ve only recently begun receiving these emails at EnterVenture.com, but I’ve seen an almost bi-weekly message like this one while working at Wikinvest.  (Remember what that feedback email breakdown looked like.)  Quite honestly, I don’t know for sure that these messages don’t work (some people must buy into them or else they’d have died out by now); however, I’m fairly certain that any site worth it’s page rank isn’t going to respond to this message.  More importantly, if you’re relying on this stategy, or are relying on a “web consultant” employing this strategy, it’s very clear you’re fishing for an easy path to success where one simply doesn’t exist.  By virtue of using this strategy, you’ve already predicted your site’s future demise. 

There’s only one free lunch you’ll find at a startup — the one given to employees to keep them in the office working longer.