Startup Lessons: Find the Right Financing Partner & Test Before You Invest in Marketing

by Mark Faggiano on October 20, 2010

Today’s post is the latest installment of our Q&A Series – short interviews with talented, experienced, and successful entrepreneurs who are on the front lines of running online businesses.

new river innovation

My guest is Reed Humphrey. Reed’s an experienced entrepreneur having cofounded or led marketing at four start-ups, including a tax services firm that grew revenue by 100-fold under his direction. Currently he leads the marketing and public relations functions for New River Innovation/easyIRS.com, including advertising, social media, partnerships, news and media.

I think you’ll like this discussion because Reed is a smart, experienced guy who is right smack dab in the middle of the startup experience. He’s got a lot of good input on financing and marketing. And his company is working on a pretty cool idea that I think could be huge.

Here’s our discussion:

B5: The name of your company, easyIRS.com, probably says everything. But just in case, tell me about what the company is all about.
Reed: easyIRS.com is focused on solving personal IRS concerns beyond April 15 by automating tax analysis and support. Examples of IRS concerns include tax debt, unfiled tax returns, audits, liens, levies, and penalty abatements.

Our vision is to create the world’s first web service for IRS problem resolution. We are similar to WebMD or LegalZoom, except with a dedicated focus on tax problems. It’s all about eliminating the fear and uncertainty of dealing with the IRS, and providing people with practical solutions.

B5: How long have you been in business?
Reed: Our parent company, New River Innovation,  was founded in Sept. 2009 with $2 million in venture-capital funding from Intersouth Partners. New River was one of the only technology start-ups in North Carolina to receive venture-capital funding during the economic downtown.

We raised a second round of funding from Intersouth in August, and we are well positioned for growth with our team, products and capital structure.

B5: Can you give me some idea of the scope of this market? How many people struggle with IRS and tax related issues?
Reed: The target market for easyIRS.com is approximately 32 to 35 million taxpayers whom the IRS contacts every year (about matters ranging from simple math errors to delinquent tax debt). The market is served by CPAs, tax attorneys, enrolled agents and tax resolution firms such as JK Harris, Tax Masters, and Roni Deutch.

In recent weeks, we’ve seen a big momentum shift concerning those “pennies on the dollar” tax debt resolution firms. New FTC legislation prohibits debt relief firms from charging upfront fees or making false promises about debt reduction, and requires them to adhere to strict disclosure standards. The rule’s implications for deceptive tax debt resolution firms are catastrophic, because many of the firms depend on charging large upfront fees.

We’re glad to see the industry cleaned up and consumers protected. And we’ve invested millions of dollars in automating IRS response systems, so that consumers can solve their own tax issues, without paying big fees to tax relief firms.

B5: What makes EasyIRS.com qualified to help taxpayers with their issues?
Reed: We are staffed by a team of IRS and tax experts, including a CPA, enrolled agents, tax preparers, IRS negotiation case managers and certified tax professionals. This team has more than 100 years of combined experience working with IRS, accounting and tax-related issues. They apply this knowledge and experience in solving personal tax concerns beyond April 15 by automating tax analysis and support. These tax and accounting experts are complemented by technology professionals experienced in high-security applications.

B5: How’s it going so far?
Reed: It’s going great! We’ve been busy developing our solution set for the past few months. We are preparing for a national launch of easyIRS on Dec. 1 (just ahead of tax season). Our value proposition is “The best way to solve your tax problem. Save money. Fix your tax situation. Guaranteed.”

Because we are an online software provider, easy IRS fees are 95% lower than traditional tax resolution firms. We do not make unrealistic promises of debt reduction, and all of our services are backed by a 100% Money Back Guarantee. No other company is doing what we’re doing, and we think this changes everything in our industry.

B5: What advice can you share with readers about having the right financing partner(s) for an early stage company?
Reed: I can’t emphasize enough the importance of finding the right financing partner. I have been a part of four start-ups, with financing provided from founders, banks, angel networks and venture capital firms.

I can honestly say that our relationship with Intersouth Partners has been the best. Intersouth took a risk on us as a seed company at the zenith of the economic downturn in mid 2009. They saw something in us that others did not. Our sponsors, Mitch Mumma and Katrin Burt, meet with us every month for 2 to 3 hours, and they provide business insight and experience that are priceless. They understand our business, and they bring so much more than just capital to the table.

B5: Let’s jump from financing to marketing. What is your content strategy? (How are you getting traffic to your website?)
Reed: We’re committed to providing the most authoritative, complete database of IRS tax debt information on the web. Statistics from 2009 show that the IRS sent more than 200 million notices to American taxpayers, more than 26.4 million IRS penalties were assessed, 3.5 million taxpayers broke a payment agreement, and close to 69 million audits were conducted. With all this activity, it is clear that there is a tremendous need for easy-to-understand content. We’re committed to providing expert content through a variety of channels; we have hundreds of articles, videos, and slideshows related to various tax topics, all of which are available on our website.

EasyIRS has created the nation’s first taxpayer advocacy site, specifically focused on IRS problem and resolution topics. The “Learn” section of our site is free, and it features hundreds of original stories, videos, slideshows, and how-to articles designed to simplify dealings with the IRS. We’re organizing and optimizing this site for SEO purposes, and we believe that free leads and word of mouth will be huge drivers of traffic, as will PR and social media.

B5: What’s your split between organic versus PPC?
Reed: We have been using PPC to test, but many of the keywords are expensive relative to our low price point. PPC makes sense for tax-resolution service firms that charge upward of $3,000 for their services. This is not true for easyIRS.com, because we charge less than $150 per engagement. So, content, social media, public relations and search engine optimization (SEO) are clearly our best long-term plays.

B5: What tips can you share with our readers about traffic acquisition?
Reed: Inbound lead generation, Sales 2.0, and content generation are the wave of the future. Traditional mass media channels will continue to be less effective until the day when they start sharing the risks and rewards with advertisers. By that, I mean that offline media needs to stop charging exorbitant fixed fees and start offering more tracking, reporting and ROI accountability. So, start your marketing with low-cost, measurable, online sources. Explore all avenues there before you consider dumping cash into a big offline media buy.

B5: What can we expect to see from easyIRS over the next few months?
Reed: Over the next 12 months, we expect our company to reach $3 million to $5 million in revenue with 40 employees (currently 20). Within 5 years, we hope to establish easyIRS.com as a household name, the first site anyone would visit if he or she had a problem with the IRS.

What are you thoughts on all of this? Got any reactions? Let’s discuss in the comment section below.

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This post was written by...

Website consultant who loves helping others build online companies. Sold @beelya & @filelater. Working on my next cash machine: @taxjar. Crazy about golf & sports. Connect with me on Google+

  • Brian

    Thanks for taking the time to interview us.

    • http://www.brand5.com Mark Faggiano

      Brian-

      My pleasure. It was fun learning about what you guys are up to. I suspect my readers will find this to be helpful.

      Thanks for commenting.

  • Luke Swims

    Web based software to help with IRS issues? Cool.

    • http://www.brand5.com Mark Faggiano

      I think so, too! It’s a great idea. I’m looking forward to see how they execute.

  • Jbuttonow

    Mark: thanks for interviewing us. We hope to help many people with our product.

    • http://www.brand5.com Mark Faggiano

      I hope so, too. And for the record….this is not an affiliate post. Quiet all you doubters out there!

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