Ramin Behzadi, CEO of Denote, felt he had a marketable technology when he and his fellow self-described "computer geeks" – including business partner Reza Bashash – designed a sophisticated data crawler that makes analyzing online content as easy as touching a button.
But when it came to fundraising, their lack of go-to-market strategy scared investors away. The Vancouver-based startup needed to find a specific application for the program and form a business plan around a niche market.
It started with a deal-of-the-day offer back in 2011. Well, more like hundreds of daily deal offers. So many in fact, that it gave Sauder School of Business MBA grad Ramin Behzadi, and business partner Reza Bashash, an idea. Mr. Reza developed an internet data crawler called 'Sidebuy' specifically designed for deal-of-the-day offers to help scrape the relevant information from these sites and gather it in one, easily accessible email.
With the help of a professor, the partners developed a sophisticated search technology capable of not only identifying similar words across the Internet, but also identifying the context – or semantics – of the words, making their technology more meaningful and relevant to users.
In 2013, Mr. Reza moved to San Jose to try and drum up investors. "But it didn't get us anywhere," says Mr. Behzadi. "We were dealing with a great and amazing technology, but no business-ready model for it."
The pair decided to refocus their efforts and find what they were missing; that is, a niche market for their product.
"We were so focused on the technology we forgot about the end product," said Mr. Behzadi. "It could be used in many, many fields and we certainly didn't have the funds to tackle them all."
Beginning in Oct. 2013, Mr. Behzadi and his associates spent months picking out, what they felt was, the best market for their product. They knew their crawler could help compile internal and external data for large and small, private and public businesses. In the end, they chose smaller companies and web-based entrepreneurs.
With the dedicated market selected and product in hand, the team set out to market Denote as a cloud-based data analysis tool that allows users to search and extract contextually related keywords, tags and concepts from unstructured data.
For example, when searching for Paris Hilton, Denote knows you're talking about a celebrity and not the city and hotel chain and will compile search results accordingly.
Through online marketing and word of mouth, Denote was able to get 300 members of their target market to sign up as testers for when their product launched in early February. More than 60 per cent of these testers have since signed up for an account and have started using the service for a fee.
Their clients are mostly small businesses, developers, designers and bloggers who want to outsource their searching needs to Denote. It allows these users to have more accurate research compiled for anything from market analysis to celebrity gossip to pet care.
Denote is currently talking to several smaller businesses about partnership opportunities to pair their online search technology with pre-existing products.
"Our intention is to have co-campaigns with these companies and promote both products (i.e. ours and theirs) to the same target market," said Mr. Behzadi.
Tech-giant Google has also been working on semantic search technology called "Hummingbird". While Mr. Behzadi admits that catching Google's attention is definitely part of an exit plan for the company down the road, "at the moment, and for a foreseeable future, we will focus on our product and ways to grow our sales. My belief is that, going this route will certainly attract the right suitors; including Google."
For now, the company has solved its "cart before the horse" problem, and by developing a startup business model with actual clientele, Denote says it will look into some future fundraising to take its business to the next level.
"Investors need to see people signed up and using the product before they jump in," Mr. Behzadi says. "Now we need to convince them to invest."
Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.