It was a cool B2B business idea. While working at Liz Claiborne, David Reinke had the idea to use crowdsourcing to help retailers select the women’s clothing they would feature in their stores. Crowdsourcing is the act of outsourcing a task, traditionally performed by a company’s employees, to a larger group of people or community (a crowd) through an open call. The essence of Reinke’s idea was that a large group of women, drawing upon their collective intuitions and a sense of what they liked and what the women they knew liked, could do a better job of picking clothing for a retailer than a retailer’s own buyers.
To execute the idea, Reinke skipped the business plan and jumped right in. He hired a chief technology officer to build a fashion-oriented social network for women with a back end that would be relevant to the B2B market. The social network allowed participants to create user profiles, upload favorites, and view affiliate feeds so they could rank new fashions and put them into wish lists. StyleHop signed up two big-box retailers as pilot customers, who used the service to select what women’s fashion items to feature in their stores the following season. It worked. Reinke says that StyleHop panelist’s predictions were seven time more accurate than the predictions of in-house buyers when comparing how each item sold versus how much inventory had been ordered.
Regrettably, despite these encouraging results, StyleHop failed in late 2009. Reinke, in a candid interview with Howard Greenstein of Inc. magazine, outlined three reasons that contributed to StyleHop’s demise. First, rather than validating the crowdsourcing idea with retailers first, Reinke put a lot of effort into building the social networking site. In retrospect, he feels it would have been better to have validated the crowdsourcing idea with retailers first. As it turned out, buyers weren’t ready to change the way they had always done their buying.
This shot down a key assumption that Reinke had made—that buyers would opt for a new method of buying if proven to be more effective. Second, if the retail side had been validated first, Reinke feels he could have used Facebook, Twitter, and Google to assemble online focus groups, to make fashion-related predictions, rather than via StyleHop’s stand-alone social network, which was expensive to build and maintain. This approach would have resulted in higher operating margins, giving StyleHop more time to prove its concept. Finally, StyleHop got a little unlucky. The person they were working with at the larger of their two pilot firms switched roles in the company, putting StyleHop back to square one in terms of trying to show its value. This scenario illustrates the disadvantage of working with a single or small number of pilot firms.
Reinke is back in a traditional job but is still a believer in StyleHop’s vision and approach. In the Inc. magazine article referred to previously Reinke remarked, “StyleHop was knowledge and methodology, not technology.
Maybe we’ll get a chance to try it again in some form.”

Questions for Critical Thinking
1. In what ways do you think StyleHop suffered by not having a business plan?
2. What assumptions, other than those mentioned in the feature, do you think were integral to StyleHop’s business? In what ways could StyleHop have addressed these assumptions? In what ways, if any, do you believe StyleHop’s business would have evolved differently if StyleHop had seriously addressed these assumptions?
3. Do you think StyleHop conducted a feasibility analysis, prior to hiring a chief technology officer and starting to build the business? In what ways do you think a feasibility analysis could have helped StyleHop better anticipate the problems that eventually led to the firm’s failure?
4. The “You Be the VC 4.1” feature focuses on SafetyWeb, a company that’s created a Web-based service that helps parents protect their children’s online reputation, privacy, and safety. What are some of the main assumptions that SafetyWeb’s business plan is based on?

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YOU BE THE VC 4.1 Company: SafetyWeb Web: www.safetyweb.com Business Idea: Create a Web-based service that helps parents protect their children's online reputation, privacy, and safety. Pitch: Parents worry about their kids' online activity. Cyberbullying, sexual predators stalking children, and the exchange of offensive language and photos are just a few of the online hazards to which children today are commonly exposed. Parents are also aware that their kids can post something online, such as an inappropriate photo, which may hurt them in the future. An increasing number of potential employers, for example, search a job candidate's online activities before making a job offer. SafetyWeb is a subscription service that helps monitor kids' online activity. It doesn't invade their privacy or snoop in clever ways. Instead, it simply scans for and aggregates the information that a child or teenager has publicly placed online. It's the same information that parents could find themselves, if they had the time and expertise. SafetyWeb simply automates the search process by using its proprietary software and system. Here's how it works. At the SafetyWeb Web site, a parent can get a free sample report by entering a child's e-mail address. The sample report lists all social networking accounts associated with that address, and notes which are public accounts and which have been correctly configured as private. To get more in-depth information and enable real-time monitoring, a subscription must be purchased. The base rate is $100 per year or $10 per month. SafetyWeb tracks hundreds of different social