How to Avoid the Next Dot-Com Flop

Yelp.com's co-founders share five secrets of their success.
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Silicon Valley is the place where young entrepreneurs flock with dreams of making it big, scoring the next trend and becoming the next hit.

It's the place where a good idea is worth a million bucks, where opportunity is fickle, success is rare, guts are a must and the reward is high. It's where many start-ups have triumphed and where countless more have succumbed to defeat.

Hundreds of ideas are born every day in the Valley. So what sets one dreamer and his idea apart from another -- what allows one to succeed and another to flop -- is crucial for Web site entrepreneurs to understand.

Fill a Need

After

eBay

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purchased PayPal in October 2002, PayPal colleagues Jeremy Stoppelman and Russell Simmons went in different directions.

But as members of the close-knit PayPal alumni family, it was only a matter of time before they would run into each other again.

Their paths crossed a second time in the summer of 2004 as part of PayPal co-founder Max Levchin's incubator, which he formed to generate new start-up ideas, Stoppelman recalls.

About two or three months into the program, at a birthday lunch for Levchin, casual chatter about the difficulty of finding good doctor reviews over the Internet turned into the proposal for a new Web site.

The next day, co-founders Stoppelman and Simmons started a buildup for

Yelp, a review site for local businesses, and the incubator's first resulting start-up.

"I had an idea that I was actually passionate about," says Stoppelman. "It was something that affected me personally. Over the course of that summer I had needed a doctor, and had searched on

Google

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... for doctor reviews and I was surprised to find no information."

In the end, it was the combination of a novel and exciting idea, among other factors, that led Stoppelman to jump on the opportunity.

"More and more people were looking for that information on the Internet and nothing really existed that satisfied that need," he explains.

It's No Secret

However, one of the first mistakes Simmons and Stoppelman made was to assume their idea was original. Therefore, they were very secretive about it.

"If you think you have an idea that's unique, you probably don't," Stoppelman points out. "If the idea hasn't been built upon yet, there are probably a couple of other people out there that have the same faculties and abilities to try and pursue it that you do."

"We weren't open to much criticism because we weren't telling anyone what the idea was," he continues.

And sure enough, when Yelp launched, there were a number of competitors with very similar ideas.

"My advice there

is don't worry about people finding out about your idea or spend a lot of time trying to keep it super-secret," Stoppelman says. "Just go out and get the feedback as soon as you can ... and get ready for mass amounts of

fine- tuning."

Feedback in general is always useful, and certainly the earlier you receive it, the better, Stoppelman believes.

Keeping It Real

Yelp distinguishes itself from sites such as Citysearch.com, in that it is "powered by the people," say Simmons and Stoppelman.

It is all about keeping it real, just like its motto, "Real people. Real reviews," suggests.

By meshing social networking with reviewing, Yelp has attracted a younger, hipper customer base.

It encourages its members to create their own urls and profiles, add pictures, invite friends and to send messages to one another. And when it comes to reviewing, nothing is off limits, not even

boyfriends.

Adding to its edginess, in a one-of-a-kind marketing trend, Yelp has a monthly party for its "elite" members, the site's top reviewers.

Pictures from the parties are published and discussed on Silicon Valley's hottest tech gossip site,

Valleywag.com.

Tight Focus

Simmons stresses the importance of early hires, and how they determine the culture going forward.

Although this might be something a lot of people have on their minds when hiring, Simmons says he believes the first employees were very critical to the success at PayPal and have been crucial to his and Stoppelman's success at Yelp as well.

"Get the best people on your team early on, because they help bring in more good people," he says.

And even if you start out small, you can morph to thinking big. "Very early on, we focused on a market-specific strategy," Stoppelman says, where he and Simmons centered their attention on winning San Francisco and didn't worry about other locations.

"That helped us in creating a real brand in San Francisco and allowed us to get a depth of content that was unmatched by any other site," he notes.

Now that it has a good hold on the San Francisco market, Yelp has spread its wings to other cities, such as New York, Boston, Chicago and Los Angeles, to name a few.

"There are people out there that just really enjoy sharing their opinions and having other people read them and react to them," Stoppelman says. And it is this advantage Yelp has recognized and intends to profit from as well.