Joe Allegra, general partner at the Lenox Drive-based Edison Venture Fund (www.edisonventure.com), knows high-technology business from the inside out. Now a venture capitalist, he was CEO of the company he co-founded, Princeton Softech (now part of IBM), and has spent most of his adult life building and selling software products.
In the softening economy, he sees the industry struggling and assesses the situation without mincing words. “Most companies are faced with the problem that the companies they sell to are not buying anything.”
To gather insights on how companies should proceed in this climate, he has invited CEOs and other senior executives of small technology companies in New Jersey to join a panel on “Growth Strategies in Challenging Times” as part of the New Jersey Technology Council’s IT industry network program on Thursday, January 22, at 4 p.m. at the EDA Commercialization Center in North Brunswick.
Other panelists are Laura Hills, vice president of marketing for Parsippany-based CyberShift (www.cybershift.com); Scott Yetter, CEO of Hamilton’s Voxware (www.voxware.com); Dean Guida, president and CEO Infragistics in East Windsor (www.infragistics.com); and Ryan Tweedie, managing partner of Sapien (www.sapiensoftware.com) in Morristown. Cost: $60. Register at www.njtc.org/events, or call 856-787-9700.
Allegra suggests the following strategies for companies to weather the immediate future:
Redirect marketing focus. The first thing to do is to change marketing messaging and positioning to resonate more with buyers, says Allegro. He suggests talking more about saving money and return on investment than buying products and services to drive businesses forward. It’s also important to focus marketing and advertising dollars on brand awareness so that potential customers recognize a company, which can help to generate leads.
Change the marketing mix. Companies are cutting budgets for the softer sides of marketing where the correlation between money spent and results is not always clear — trade shows, print advertising like brochures, and other collateral material. Instead they are optimizing their websites to ensure that when people are looking for products or services like theirs, their company site appears near the top of their search lists. Again the goal is lead generation.
Adjust pricing strategies. During a downturn, when cash is tight, a helpful response is to be flexible about payment terms and to offer lower entry prices. “Building the first version of a software product is incredibly expensive,” says Allegra, “whereas subsequent sales are lower. If a customer can’t afford half a million dollars, but can give you $150,000 a year for the next four years, that may be a strategy to get people to buy something sooner rather than later.”
Consider becoming a software-as-service company. In this business model companies do not purchase software but, instead pay a monthly fee to use software from the software company’s servers. Probably the most famous example is www.salesforce.com, whose product is a customer relationship management system.
Software-as-service has been a big trend over the last three to five years, says Allegra, because the upfront costs of buying into software-as-service are a lot less than a software purchase.
Restructure your product offerings. “Instead of giving someone the full functionality of a product up front,” says Allegra, “companies may restructure it so it is more of an entry-level product, with less functionality and lower cost.” This way, even if a company can’t afford to purchase the full product now, it becomes your customer and over time may upgrade to a higher-cost product. “You don’t lose a sale, but gain a sale at a lower entry price,” he explains, “and it’s easier to upsell a customer than to interest a prospect.”
Allegra grew up in Hawthorne. An economics major with a concentration in computer science at Rutgers, he graduated in 1975. He also earned an MBA at New York University.
Right out of college Allegra spent a couple of years with McDonnell-Douglas Automation, and in 1977 joined Applied Data Research, where he stayed until the firm was bought by Computer Associates (www.ca.com) in 1989. Then he and several colleagues left to create Princeton Softech, whose products are primarily database utilities sold to large companies throughout the world.
In early 1998 the nine-year-old Princeton Softech was bought by Mountain Lake-based Computer Horizons, and then in 2002 the company was purchased with private equity. A little over a year ago it was sold to IBM. Allegra also founded the Software Association of New Jersey, which was eventually folded into the New Jersey Technology Council.
In 2001 Allegra joined the Edison Venture Fund, which invests in expansion-stage companies that have $5 to $20 million in revenue. These companies have built products, have some customers, and are looking to expand their sales and marketing. Edison Venture Fund helps them to professionalize and build national and international sales and marketing organizations. The fund has been in business for 22 years and has made over 160 investments, 40 of them in New Jersey.