The Risks of Declining Registrations

DollarThere was a recent article on Bloomberg News suggesting that the next financial crisis could start in Silicon Valley and “Fintech”. Fintech is a broad term, but touches all races who use online registration with the movement of over $1 Billion per year thru the 100 or so race registration systems. Here are some of the key thoughts from the article:

The fintech revolution has created an environment ripe for instability and disruption. It does so in three ways. First, fintech companies are more vulnerable to rapid, adverse shocks than typical Wall Street banks. Because they’re small and undiversified, they can easily go under when they hit a blip in the market. Second, fintech companies are more difficult to monitor than conventional financial firms. Third, fintech has not developed the set of unwritten norms and expectations that guide more traditional financial institutions.

Many race registrations are happening by transactions going to the race registration company, and then payments are made from that company to the race. This is risky since the company may use that cash and delay payments of the money to races to pay their own salaries and other costs.

This is not a problem when a company is growing, as most race registration companies have over the past 5 years between shifts away from legacy vendors and the general increase in the number of races and registrations. There is more money coming in the door each day, so there is plenty of money to pay past races.

However, in a shrinking market, this can be a death spiral. Fewer races and fewer registrations means less cash coming in. This leads to downsizing of staff and more delayed payments to customers, especially if the company was funding operations with the “float” of race funds (the two weeks it takes many companies to pay out).

And, we are in a shrinking market as reported in our recent Registration Market Analysis. The number of races on RunningintheUSA.com fell by 4%. And the number of races on all vendors (except RunSignUp) we could get a hard count for the number of races in October fell from last year (ask your registration company for accurate numbers – these are what we could find by searching public calendars):

screen-shot-2017-09-07-at-4-16-11-pm

Races should be asking their vendors for financial statements and details on how their race funds are held, in addition to race and registration growth. RunSignUp is transparent on this issue, and has made large investments in becoming a Payment Facilitator. This means each race (and charity) becomes their own merchant with their own bank account. RunSignUp can not even use your money if we wanted to! The financial statement you want to ask for is their Current Ratio – in simple terms how much money the registration company has in the bank vs. what they owe races.

There are already signs of a shrinking of the number of registration vendors. The recent announcement of RaceIt being shuttered in November took many by surprise. They will likely not be the last – the margins and economics in this business are difficult, especially when combined with the need to stay on the cutting edge of technology. We do not mean to be fear-mongers, but races need to protect themselves against getting caught in the type of credit squeeze discussed in the Bloomberg article.

PunSignUp

punSignUp

We wanted to share an inside view of what really happens at our company. Last night Bob sent an email to everyone:

I know a number of you work in Moorestown, and a lot of others will be coming in another week and a half. PLEASE be careful with your shoes. There is a shoe thief loose in Moorestown.

“A person reported their left shoe was missing after they took them off while at the Moorestown Library on Sept. 6. When they went to put the shoes back on, one was missing. It is described as a purple and black Nike basketball shoe.”
The responses:
MattMo: “Just what we need, someone clogging up the system with petty crime. The thief sounds like a real heel. Somebody ought to sock them.”
Johanna: “I did end up with 2 left running shoes when I left to run today.”
MattMo: “The thief had no sole and was just being knotty.”
Kohart: “Those puns are shamelace. And that thief must be a pretty good sneaker.”
Natalie” “I love that this is on the core email chain. PunSignUp is the best!”
MattMo: “Thief last seen wielding a stilletto.  Not easily defeeted.”
Megan: “This is quite the Cinderella story.”
Kohart: “I’m flip-flopping on whether or not your pun is good Megan…”
Ryan: “Not sure what I stepped in to; this thread is laced with bad jokes.”
Megan: “I put my heart insole into that Ryan!”
Andrew S: “First of all… it wasn’t ‘purple and black’, it is more navy blue…”
MattMo: “I realized I could have done a lot better with my previous pun. On a scale of 1 to 10, I would give myself Asics.”
Sue: “That’s it. I quit!”
Matt S: “Puns can bring a New Balance to workplace engagement. Good thing we don’t work with a bunch of loafers.”
Kohart: “This is sandalous.”
Connor: “Am I too late to shoehorn in a comment?”
Marlise: “I am tongue-tied…”
Bob: “I just don’t want to step on anyone’s toes.”

U.S. Registration Market Analysis – September 2017

market-analysisWe do a US Registration Market Analysis every 6 months:

We try to make it better with your feedback (so feel free to send suggestions or corrections to bob.bickel at runsignup.com). We do this as part of our own internal market evaluation processes, but share it since there does not seem to be a good source of information like this. Last year, we also added our thoughts on Race Registration Market Trends and Race Registration Company Valuations. Expect some updates to these over the coming weeks.

It is tough to estimate market share since there is no one place that has ALL races, and races are open for only part of a year, and different vendors have different search tools for finding races, so we took several approaches to looking at things.

RunSignUp Numbers
RunSignUp has been very public about sharing our numbers. You can read our Year End Report for 2015 to see that we had over 10,000 races use us to process 2.7 Million paid registrations in 2015, and 2016 Year End Report to see we had over 14,000 races use us to process over 4.1 Million registrations. The trend continues positively – and we are estimating 16,000 races processing registrations on RunSignUp and over 4 Million paid (not including imported) registrations in 2017 even with the loss of URUN due to the Active lawsuit.

RunningintheUSA CalendarRunningintheUSA Market Share
RunningintheUSA.com is the largest calendar of race sites in the US with 47,936 races listed. This is down from 49,749 last year at his time – a decrease of 3.6%. This may be the sign that the growth of the number of events in endurance has peaked and is falling. RunningintheUSA uses Active.com’s, RunSignUp’s, and Race Entry’s automated API to load races from each of us – that is why you see the little logos for each of us on the calendar. This probably means that we are unfairly represented as they do not get every race from every other of the 100+ registration providers in the market.

We do a sample every 6 month and do a count of the total races for each vendor of 1,000 races in the month after the sample is taken (October, 2017 in this count):

Screen Shot 2017-09-07 at 1.53.42 PM

RunSignUp will be used by over 16,000 races this year for processing their registrations, which is 33% of the races in RunningintheUSA, so those numbers are probably fairly accurate for RunSignUp.

October Market Share
There are over 100 registration systems, and not all of them have race listings. For example we could not find a list of Chronotrack Live races, but know from their public statements that they processed over 1 million registrations in the first half of 2016 and that they have grown since then. Likewise, IMAthlete is much stronger than this list shows because of a number of large events they provide registration for like the LA Marathon. In addition, the search tools may include non-endurance race events in some cases (for example Events.com mixes a lot of different types of events and there is no advanced search filter). Some vendors like Haku and Race Partner, do not have a race calendar. And search methods change from period to period – so data available in previous periods is no longer available (hopefully not because they were avoiding this counting!). And a final caveat to this data is that some race calendars may include races that do not have registration on their sites (the RunSignUp data is accurate since we have a search flag internally we can use to look for races that are open for registration on RunSignUp):

Screen Shot 2017-09-07 at 4.16.11 PM

The number of races listed on RunningintheUSA fell by 8% from last October to this October, while the number of races on RunSignUp grew by 15%.

Turkey Trots
We also started tracking Turkey Trots. We counted the Active and RunSignUp races by doing the count based on doing a hand count of races on Nov. 23 on RunningintheUSA. For other providers we just used a manual count from their race calendars.

Screen Shot 2017-09-07 at 4.24.39 PM

Alexa Rankings
Alexa is a cool tool that shows the ranking of websites based on page views. It is approximate, but is fairly accurate. As above, there are lots of caveats to this. For example, EventBrite, Active and Events.com all are covering much more than the endurance market and their numbers are inclusive of those other markets.

These rankings among all US websites are from early September and will change depending on the time of the year (going lower in December when there are few races happening and growing largest around Thanksgiving for example). The other thing to note is that it is getting tougher to rank higher. For example RunSignUp has fallen from 4,615 to 5,864th place in the US even though our page views have grown by 16% over the previous 30 days as compared with last year (even with the loss of URUN). So the negative numbers are better than they seem:

Screen Shot 2017-09-07 at 4.27.40 PM.png

To put some context on these numbers, RunSignUp is doing about 3 Million Page Views per week now to get in the Top 6,000 sites.  As further context, another company Bob is on the board of has a page rank of 45,699 and has about 810,000 page views per week.

So What Does This Mean?

Our objective in doing this was trying to understand how far we had gotten with our growth. We are guessing that we are at about 12% market share with our about 4 M paid registrations in 2017 – assuming there are about 40 Million Paid Registrations in the US.

We are really proud of the impact we are having on the endurance and race market. Especially since RunSignUp is a lot more than registration, as we have grown to be a full race management platform supporting the entire race lifecycle:

 

lifecycle0220.pngThe integrated CRM database give participants a better experience with things like free results, notifications and photos, while races have better promotional and fundraising tools to maximize the impact of their efforts.

The Race Director and RD Scoring help Timers score and provide results for over 11,000,000 participants annually. RD Go, our Cloud based Scoring and Results system used by Timers and Races hosts results for over 5,000 races and sends tens of thousands of result notifications each weekend. RaceJoy is by far the leading race GPS Tracking solution in the market. RunSignUp for Clubs is used by hundreds of clubs to help with membership management and tie to races. And our free services like Volunteer Management, Check-In App, Race Calendar Widgets are used by many races beyond those who do registration with us.

Thank you to all of our customers who provide us great feedback on what is needed in this market, and who tell their friends about us🙂

Welcome Darren Wamboldt

Darren.jpgWe are happy to welcome Darren Wamboldt to the RunSignUp Team! Darren joins Jeff Kiesel and Meredith Klein as part of our User Experience Manifesto.

Darren has led the RaceIT User Experience effort for the past 5 years. Coupling his deep passion for UI design, his coding abilities and his industry knowledge will help make our offerings even better for our customers. He will be focused initially on creating additional templates for our Race Websites, along with bringing some other goodies to race websites.

Darren lives in Richmond with his wife and two boys, who might be a bit more into lacrosse than running (lacrossesignup.com anyone?)…  Darren will be working in our Richmond, VA office.

Welcome Meredith Klein

unnamedWe are happy to welcome Meredith Klein to the RunSignUp Team! Meredith joins Jeff Kiesel as part of our User Experience Manifesto.

Meredith has been working as a consultant for the past month and a half with us – designing the individual results page we recently released. Right now she is working on a new Profile Page for all users – a snapshot of the design is on the right that includes her own profile picture.

Meredith has a diverse set of User Experience design and development work. Her Psychology degree helps give her perspective on what users want and how to best satisfy them. She also has an artistic eye for design and will bring some fun and vibrancy into our offerings. And she can code and get stuff out the door, as she proved with the Individual Results project!

We are excited to make our User Experience Manifesto real:

Our Commitment: RunSignUp will not only have the most feature rich race management platform, we will also have the leading user experience for participants, race directors, race management companies and timers by the end of 2017, and will continually improve the user experience into the future. Our goal is to create easy to use technology that makes a difference to our customer’s business and participant experiences, and make that pleasurable.

Why Software Dies

mspaintThis blog is the other half of the blog on When Software Dies. There are obviously many, many reasons why software dies. This blog hopefully helps a few creators avoid mistakes and a few users from making a poor choice that puts them in a costly position to migrate earlier than they planned.

1. No Development Expertise. If your business is software, you need to know how to develop software. You need to have people on your founding team that are full time and 100% committed. Software is art, and you need amazing artists to build a real software business.

2. Non-competitive Functionality/Cost Ratio. If there are many alternatives in a market, then users have a choice to go to the vendor that gives them the best ratio of Functionality relative to cost for their needs. Of course this covers software that is bad or has no real value, but assume you get over that hurdle. Many vendors can coexist in a market if they have different levels of functionality and cost. Some customers need high functionality and will pay the extra cost, while some customers are OK with more limited functionality if they can save money. Being on the wrong side of this algorithm may be OK in the short term because of marketing or salesmanship or market share – but technology has a way of wearing down non-competitive vendors. Resulting in software death.

3. Insufficient Funding. Almost every software startup underestimates the cost of building a whole company (not just development, but support, marketing, sales and finance), and they overestimate how fast customers come on board. These software creators simply wind up not being able to pay their mortgages. (Which is why most software companies are started by young people who have low standards of living and can last longer on insufficient funds.)

4. Too much Funding. When taking capital, many startups or even mature companies need to promise certain growth that may not be realistic. It may pull them out of their focus and into a broader competitive market they are not ready for, or that distracts them from their original focus. They grow too fast and hire people who are not “accretive” – adding more value to the business than their cost.

5. Not Caring About the Customer. Too many businesses are driven to optimize profit and value for owners. This is especially dangerous if it is too short-term focused. At the end of the day, software companies need to make sure the value they provide is greater than the cost.

6. Old Software. There is a need to continually reinvest in software. A rule of thumb I have is that software needs to be re-written every 3-5 years. And the rewrite needs to be continual – not a big huge switch that winds up being just as bad as forcing a customer to migrate to another vendor. Too many companies are not investing in their core asset. Technology keeps moving forward and brings opportunities to improve existing functionality, and customer’s needs continue to evolve. Software needs to keep pace or it dies.

If you are a creator, my main recommendation is to be honest with yourself. Do you have the technology, expertise, go-to-market strategy, and funding to be successful? Will customers really pay for what you are creating and when? Do you have other options? Are you digging yourself a hole that you will not get out of?

If you are a user, feel free to ask the tough questions to your vendors. How are you funding your company? What is your current ratio? How many developers do you have, what are their track records and are they employees or contractors? Why is your product right for me now and in the future? What is your product roadmap? How much do you spend on development vs. customer support vs. sales and marketing? What are your long term plans? Where do you hope to be in 5 years, 10 years?

If you want to learn a few lessons from real life companies, see this list of 232 failures

When Software Dies

mspaint
Microsoft Paint “Removed

This past week RaceIT told customers that they would be closing down their servers later this year. I’ve (Bob) had a personal experience with this in the past, and thought I would write this blog to give the creator and user perspective. I also will write a blog on Why Software Dies.

As the picture on the right reminds us, this happens to even the most successful products

Creator Perspective of Software Death

When I was at Bluestone, we created one of the first Application Servers for the web in 1994. The market and the company grew quickly, and we went public in 1999 during the first Internet bubble. Our stock went from 15 to 130 and back to 15 within 12 months, and then Hewlett Packard acquired us because they wanted to do software. Half a year later they decided they wanted to buy Compaq and do PC’s rather than software and shut our division down. I was the head of that division and had to lay off 600+ people (including myself).

As you can imagine, it is a life altering experience for the creators of software. Bluestone had nearly 1,000 person years of development into the product, and several times that in terms of the rest of the company employees in Support, Marketing, Sales, and Finance. Not only did most people lose their jobs, the very center of their creation – a set of software programs – were destined to be no more. It would be like Van Gough seeing a beautiful Starry Night painting burned.

When I first found out about RaceIT, I called Eric Cone (the original creator of the RaceIt code, founder of the company and former CEO) with condolences. While he left a number of years ago after the acquisition by Competitor Group (and recently joined RunSignUp), I knew he still had ties and would mourn this final move. I knew he would care about the people he had hired and worked alongside. I knew he would feel frustrated that although the RaceIT code base may have been getting a bit old, there was a lot of great code in there that had done some pretty amazing things. And now it would be gone – like Starry Night in flames…

For creators, what happens when software dies is like when you lose someone close to you. It sucks.

Users Perspective of Software Death

While it may not carry the emotional toll that creators feel, the impact can be very real. Users have to “migrate” to another software platform. This means re-learning, data migration, and potential impact on how their customers use it.

There are real risks here. In the Bluestone example, customers had written many applications on our software. Fortunately there was the Java Standard (J2EE) that made migration simpler, but it cost real time and money to do the migration. In the case of RaceIT, they have told customers that their servers will shut down in November. What happens if a customer does not export their data before then? What happens if the few people left at RaceIT who know how to run the servers leave before then? Will appropriate security patches continue to be applied? What if there is a DDOS attack or worse a security breach before a customer’s race and data is migrated?

Many RaceIT customers had already migrated to RunSignUp over the past several years. We have a similar philosophy to when Eric ran the company before it was acquired, with a focus on technology solutions for the industry above all else. We have taken their former role of being the leaders in the market and having the “momentum”. There are still many RaceIT users, and RunSignUp has created a Migration Assistance Program where we help customers with their new race websites and getting up to speed on RunSignUp and their data migration.

For users of software that dies, it is a pain. But there are usually others to help pick up the pieces, which helps a bit…