Ach Security Framework Guidance & Sample Checklist: Fill & Download for Free

I realize that this answer is super long - you can check out a link to the PDF for offline viewing / Notes: https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B_YnnzLhl5HVNWE0MzQ2NWItMzQ4Yy00ZmEyLTg5ZWUtM2Q1YjZiOTlhOTFl&hl=enALSO: I made some edits & added a final paragraph that hopefully will serve as the impetus for a youngster to rock and roll on thisA Startup Model NEEDED in Private Sales / Group BuyingThere has been an explosion of private sales sites like Groupon & Gilt that are all targeting the new trend of social commerce with over 200 Groupon or Gilt Clones emerging in the last 2 years. After hearing pitches for close to 30 startups in social commerce that are all over the map - there are two characteristics that jumped out at me.That “social commerce” is the new social network of 2007 with how many people and bad ideas there are coming out to make some quick cashI have spoken to a lot of people who have no idea what the hell social commerce is and where the opportunity really exists in this industry.After getting frustrated with how dumb most of the ideas I have heard are, I realized that I needed to put my money where my mouth is and step up to come up with something unique. This is something that I have thought out but am simply focused on another project - I recently closed a seed round for $4.1m to build a new Men’s Outdoor Brand. However, this doesn’t mean that my ideas stop, so I am offering this to you as a means to hopefully present a compelling case for creating value in this spaceI believe that Quora is the only place that a start up idea & business model can be effectively disseminated that will actually position it to be acted upon - simply Quora is one of the most skilled, technically inclined, startup passionate communities on the interwebs. On that note, HERE WE GO - if you want the idea, take it, run with it, and build a great company! When you make a bajillion dollars - buy me a pint and tell me all about!Sourceable.com[NOTE: Sourceable is not a company that currently exists - it is merely an idea that I flushed out on Quora on my way back to SF from Holiday with my family. It's the idea that I hope that I laid out sufficiently to hopefully grab some driven entrepreneur to champion. If you think it sucks - dope! Let's chat about why. If you think it rocks - dope! Then what's stopping you from making it yours?]Elevator Pitch: Alibaba for Private Sales & Social Commerce.Sourceable is a marketplace where group-buying/private sales sites can discover new vendors & competitively bid on products to sell on their group-buying or private sales site.Prospective Members:Private Sales / Group-buying Sites (the Outlets): Services like Gilt.com, RueLaLa, FashionStake, SFgate Deals, etc who are offering products via private sales or deals for their subscribers. I am going to refer to these members are the Outlets as they represent the sales outlet that the product will be retailed to the consumers through.Brands / Consumer Products Companies (the Brands): Consumer products companies with excess inventory that needs to be sold at a discount to finance operations or make room for the new season. I am going to refer to these members as the Brands because it’s the brand name of the products that are the primary aspect of the purchase and what will be marketed by the Private-Sales / Group-Buying Sites (or the Outlets as referenced above)Problem:The Outlets are Marketing Companies not Product CompaniesThe heart of the Outlet’s service model is that they are marketing organizations whose business model is enabled by scaling their subscribers to achieve the value of their service. Groupon, LivingSocial, and Gilt (collectively referred to as the Outlet per the model above) are valuable because they enable the products/services featured on them to:1. Reach a large number of population of2. New demographically curated potential customers, who are actively undergoing3. Purchase-focused decision criteria on a scale that is4. Otherwise prohibitively expensive to achieve on their ownThese are marketing organizations whose product is the subscriber, at least from the Brand / Vendor’s perspective. The embodiment of this is Groupon as they have been purchasing nearly every Doubleclick Display opportunity on the bloody internet (an exaggeration I know, but you get the picture - Honestly, I have been floored by how many times I see a Groupon ad these days). Groupon, Gilt, and LivingSocial have secured the critical mass in their subscriber base that enables businesses to sell their goods and services in a localized fashion to a high # of purchase focused customers. The reference to "purchase-focused" refers to the operant conditioning by the social commerce sites explicitly detailing action-driven buying products. Thereby when a consumer sees a Groupon email and opens it they are inherently gearing themselves up for a decision based on the following internal dialogue - "I am going to open and evaluate this deal whether I am going to purchase or not". Regardless of whether they purchase or not, they are engaging in a purchasing decision by virtue of opening an email by Groupon as the email is the product that Groupon is selling (this also applies to all other Flash Sales / Private Sales / Group-Buying Site).2. Sourcing Product for Private Sales is disjointed, individualized, and not scalableWith the explosion of various social commerce companies finding a steady source of new goods to sell to the community is difficult to find and labor intensive to continue finding great dealsFinding new product and keeping track of all the vendors is a disjointed process that requires a lot of manual labor to process and keep track of everying3. Sourcing Sales Channels for Excess Inventory is not a core competency for BrandsIn early 2009, I was just brought in to run operations for an exciting men’s footwear company. Since we were a small brand, we had factory minimums that left us carrying unsold inventory at the end of the season, but we didn’t have any relationships with cut-out shops (think Loehmann's plaza or Daffy’s in NYC) to sell our goods. We were frantic trying to tap our social and professional networks for potential vendors - this was a very relationship driven process with huge time investmentsAs a new brand, it difficult to get in touch with all of the various private sales sites. Sourceable will make this process much easier4. Information Asymmetry regarding the quality and brand alignment for the OutletsSolution: Selection Framework & Outlet ProfileValue Proposition:Central Location to Source Deals & Execute TransactionsOne of the most difficult aspects of beginning to new Private Sale / Group-buying site (the Outlet) is sourcing the products / services to be featured on the site. By virtue of having physical products, every brand has the problem of selling excess inventory and therefore needs a central place to discover the available options for selling their product. Sourceable is the marketplace that enables Brand’s to discover the various channels for distribution to sell their excess inventory at discounted prices. The aggregation of buyers means that “you win in bank compete over you” to borrow the Lending Tree slogan.2. Return Pricing Power to Brands (Recognizing Barriers to Entry)Prior to Gilt, RueLaLa, PLNDR, and Reverse coming into the marketplace, the market for cut-out merchandise (Cut-out is the industry term used for the inventory remaining at the end of a season that a brand is willing to sell at a discount (eg cut-out) to free up cash and make room for new inventory for the upcomin season) was characterized by lack of information about who the buyers of the merchandise were, lack of connections to be able to even enter into a discussion about who would/could be interested, and lack of knowledge about impact that the cut-out sales channel will have on the brand’s reputation. This meant that brands, especially small brands, were left scrambling to find someone to even talk to about taking the cut-out merchandise, which inherently destroyed any negotiating power that a brand would have had - we needed to sell the goods immediately and they had their choice and the pricing power to hammer us for discounts.However, in the last 2 years the entire industry has changed with a huge influx of competition of cut-out shops (READ “the Outlets”, Gilt, RueLaLa, PLNDR, REVERSE, or any of the fashion deal sites that have emerged over the past several years). This vast emergence of new players has dropped the barriers to entry for competitors in the Outlet space - for very little cost, a startup can begin a deal site for selling cut-out / excess merchandise from a Brand. This means that Brands are in a position of power as we can now choose who to sell out products to and provides the foundation for why Sourceable should exist - the central location to have the 100s of Outlets sourcing and bidding on merchandise for their sites.As we have discussed, the barriers to entry for the Outlets are relatively low and are dropped even further by virtue of the Angel and Venture dollars chasing numerous players in this hot market. The efficient portfolio frontier thesis for most institutional capital in the US prevents most of the angel boom dollars from investing in fashion, restaurants, and non-Apple related consumer products companies (e.g, 1 to 3X Rev multiples don't compensate investors for the risk inherent to these types of startups) - (collectively referred to as the related industries). The barriers to entry to these types of company are inherently higher due to the dearth of capital available for emerging ventures. In addition, the current Angel Boom is "different" this time because there are programs Y-Combinator (YC) and intelligent investors pushing the business model/revenue model to help push startups on the path towards profitability via sustainable business models. However the most interesting part about fashion is that the organization is as complex as the code-base needed to power the web apps produced out of programs like yc. When is comes fashion startups the only people with the experience necessary to offer guidance like Mark Suster and Fred Wilson come from highly specialized areas of domain expertise (eg logistics, accounting, sales, marketing ). Furthermore these specialized individuals are accustomed to large budgets and a lot "bodies" to process the work for their department. Very few people have actually run a company and can actually put all the pieces together for how it works. Therefore, there is a decided lack of authoritative, experiential knowledge being disseminated to aspiring fashion entrepreneurs, thus informing the high barriers to entry for this industry.Sourceable is the vehicle to harness the fact that there are a huge number of competitors fighting over products for their Outlet. This is the marketplace to more effectively realize the pricing power that high barriers to entry provide for Brands.3. Select the Correct Channel that Aligns with Distribution Strategy (See Selection Framework below)Selection FrameworkTraditional Off-Price / Excess Inventory Sales Channels Can Erode an Brand’s Value. Historically, brands have been price takers when dealing with their cut out goods. When you look at the market for selling cutout goods, there was not a convenient avenue to sell you goods.There are four questions that a brand must consider when choosing to cut-out goods:1. What are the forecasted cash outlays for the next 8 weeks?2. Have all current retail channels been contacted for fill-ins and reorders?3. What are the prices and quantities of the prospective order?4. Will this cutout sale be in existing retail channels that are the same market of this retail channel? If so, how many customers will see this and will this present significant degradation to the brand identity and image in the consumers eyes (I.e. Are we going to have a creative rec at Nordies Rack situation here).The distribution is going to be one of the most important issues for a Brand to consider as where you sell your product can significantly impact the Brand image that consumers are ostensibly purchasing. For example, one of the most successful men’s footwear brands to emerge over the last 4 years was Creative Recreation (http://cr8rec.com/). Over the course of four years they experience stratospheric growth with revenues reaching an est. $80m. As quickly as trends emerge, they crash and burn equally as fast. Following the company moving their production from China to Vietnam, for “strategic” reasons not at all relating to the behavior of members of the development team, the brand shipped a huge season - something like 500k pairs. The brand crashed at retail during Nordstrom’s largest buy and ended up at Nordstrom Rack. I cannot tell you how many times I heard Creative Rec being mentioned could be found at Nordstrom Rack - meaning that the perceived value of the brand diminishes because it can’t be hot or valuable if it is found at a discount chain. If it can be found at Nordstrom Rack (ie a cut-out / off-price channel), then I am not going to pay full retail as the perceived value to my peer group will be diminished - thereby decreasing the value of the brand.When it comes to luxury, the consumer is acutely aware of the intangible factors for how the channel of distribution connotes a defining sense of Brand value. Therefore, it is imperative for a brand to select the distribution for off-price goods that:Is not part of the same physical shopping path for you target consumer (i.e. not across the street from the mall that you have retailers in)Is located in a non-core geographic market (eg if your brand is performing well in Miami don’t sell to a cut-out store in Kansas City as they have correlated consumers -> sell in Colorado)Sell a greater # of units versus focusing on $/unit because you do get a tax benefit for selling at less than cost.Receive pre-pay or Net 10 payment terms for the Deal -> Net 30/60 terms should never apply to a cut-out / off-price site as these types of people are deal makers and you can never assume that they are an acceptable credit risk. The Discount (ie 50% off Wholesale) is compensating them for the risk of taking the inventory and paying quickly.Where Gilt excelled was that there was not a "good" cutout venue because the market pretty much sucked. Gilt was an anonomly in this market - a place to cutout your inventory to a highly desirable demographic that would actually help build the brand penetration of brand. Read How does Gilt's business model work? to read more about this.Outlet Profile on Sourceable.comOne of the main goals of Sourceable.com should be to provide clarity as to whom is going to be retailing the merchandise and the details for the target market. The goal is to provide a detailed view of the demographic and traffic volumes that are integral factors for the bid selection process. The profile items such as:The Profile will contain the secure banking information for each Outlet & Brand as controlling the transaction process is an integral part of driving long term value for Sourceable.com. Probably in Phase 2 of the product’s development, the introduction of an analytics module to track how visitors and conversions are occuring to provide more weight to the Outlets. By virtue of selling more goods, the Outlets can weight their Bids higher and provide them with negotiating power with the brands.4. International DistributionHistorically, the main avenue that a brand had to cut-out excess inventory was to sell the goods to another country (i.e. cut it out to South Africa). This alleviates most of the risks for disrupting the distribution channels. Over the course of running several brands, you accumulate emails and contact details from 5 - 10 various international cut-out stores. With the massive success of Gilt.com / RueLaLa, we are seeing that many startups are trying to replicate the model internationally. Therefore, there is value to aggregating the physical cut-out distribution channels for online & physical stores.In addition, there is considerable risk in Brands working with these international parties on their own as there is very little information regarding their credit worthiness or payment history. Sourceable.com is geared to provide more information and make sure transactions.5. Logistics is expensive, difficult, and time consuming to do correctly.One of the huge market opportunities for online retail is logistics & fulfillment. Aside from Amazon, Diapers.com (now a wholly-owned subsidiary of Amazon, but one of true market leaders for lean logistics & efficient fulfillment), and Zappos - there isn't an established methodology for logistics and fulfillment that drives operational performance. As Sourceable will be the marketplace for securing these goods there is value in utilizing the shipping methodologies that only scale can provide. It is more cost effective for Sourceable to consolidate shipments from multiple brands, consolidate them into one container and manage the fulfillment to the Outlets warehouse than it is for them to go at it alone.In addition, the most efficient practices revolve around scale. Thereby the more Brands & Outlets that source deals through Sourceable means that Sourceable can drive more cost savings with a revenue model that enables Sourceable to realize the profitability benefit for these efficiency gains (ie shipping revenue is set to be fixed at 7.5% of the Deal’s value, therefore Sourceable benefits from the cost savings of consolidating shipments & more efficient logistics practices.The DealIt all begins with the deal - a Brand creates a new Deal on Sourceable for their excess inventory that they are looking to sell. There are 5 items that every deal consists of:1. Available to Sell Inventory Report - An ATS is a common term for the # of goods in inventory that a brand has available to sell for purposes of a discount. Not all inventory is available because there maybe orders with future ship dates or goods that Timberland may not want to sell.2. High Resolution Images of Products on ATS3. Price Floor per Item4. Minimum # of Total UnitsBid Model:1. Straight-Bid:A Brand Creates a newthe Private Sales / Group-Buying sites (the Outlets) bid based on the following criteria:Products selected in Bid% Above Price Floor for Bid# of Total Units (must be at least # set as minimum on the Deal postingThe rationale behind the % is that there can be multiple prices for goods in the ATS (eg a pair of shoes can cost $50, while a pair of boots can cost $70). The % gives a level playing field for the various prices levels on a given ATSBrands receive bids from interested Outlets and selects the bid that they want.2. Multi-Channel:Brands can choose to allow multiple Outlets to host a sale during a specified period of time.Price will be set by the brand and accepted by the Outlet. The higher price is offset by the zero inventory risk held by the Outlet (eg No Minimums).When an Outlet is hosting the sale, the outlet will make an API call to the Sourceable deal manager for the inventories availability when it’s added to the shopping cart.Service Model - Straight Bid:Example case will be based on fashion because I run two brands in fashion and it’s the industry that is most applicable to this service offering - however, any consumer products company that have excess inventory that needs to be sold at a discount is applicableA Brand creates a new Deal Opportunity on Sourceable for their excess inventory. For example, Timberland would post of new Deal Opportunity for selling their winter boots that are unlikely to be sold prior to the end of the season.The Outlets receive a notification of the new Deal and are prompted to respond.An Outlet places a Bid with the Products, Bid %, and Units they are interested inThe Brand that is hosting the Deal selects the Outlet’s bid that achieves the unit, revenue, and distribution channel balance that is best for them (See Selection Framework below)5. The winning Outlet executes payment for the bid goods upon the closing of the bidding process via ACH.6. Sourceable.com manages the logistics for getting the freight from the Brand to the Outlet’s specified distribution center.Service Model - Multi-Channel:The second type of Service Model is when a Brand selects the Multi-Channel Route for handling their potential deal. This strategy is where the minimums are either too large for the Outlet to secure on it's own.1. A Brand posts a deal with the Multi-Channel option selected.2. The Oulet signs up that they want to host a Deal with the strategy3. Sourceable manages fulfillment directly to each of the Outlets successful transactionsRevenue ModelTransaction Fee: 5% of Deal amountShipping & Fulfillment Fee: 7.5% Charged to the BuyerHere are some of my earlier notes:Round 1:Round 2