For the second night of their Founder Stories series, 1871 brought in Chuck Templeton, founder of real-time restaurant reservation service OpenTable. Last night, Templeton shared his inspirations, experience working with a two sided network, fundraising tips and future plans with the audience of more than 300 people.
The biggest news of the night, from the Sillicon-Valley based entrepreneur, was that his newest project, Impact Engine—a 12-week social venture accelerator that provides funding, resources and support to social entrepreneurs—will be hosted out of 1871.
Templeton kicked off the night by explaining his initial inspiration for OpenTable: it was 1998 and he had just spent three-and-a-half hours watching his wife calling restaurants, getting voicemails and leaving messages. His in-laws were coming into town (with a father-in-law who happened to be a co-founder of Lettuce Entertain You Enterprises, a group of approximately 70 restaurants founded in Chicago) so the pressure was on.
While not all of us have that kind of pressure when trying to get reservations at the perfect restaurant, Templeton realized that the industry was not technologically advanced and could use his help. And actually, he underestimated their lack of advancement: “My thinking was I’m just going to take this thing called the internet and plug it into the back of all these restaurant information systems that were out there. In about four days I realized that there weren’t any reservation systems to plug into,” said Templeton.
So he built one, taking into account the dynamic nature of restaurant tables. An important early decision for OpenTable was targeting the influencers in the market and recruiting the most powerful restaurants. “We were able to get the top 20 restaurants and the next 50 would all want to be where those top 20 were—there began to be a critical mass on the website,” said Templeton.
OpenTable debuted their product in San Francisco and Chicago. The decision to debut in two markets at the same time was a risky one: Templeton called this decision “unintelligent,” saying the product was terrible at the time but restaurants immediately could see the value in it.
He was able to penetrate the market by keeping the upfront price of the software low and changing the business plan to a software as a service (SaaS) model, a departure from the norm at the time. While GrubHub, the subject of the first Founder Stories event, went after the diners first, OpenTable targeted the restaurants. According to Templeton, “in the first month [OpenTable brought] in anywhere from 400 to 700 reservations to a new restaurant that opens up. That pays for the system for over two years: there is no competitor that can offer that type of return on investment.”
Templeton said the most important lesson when scaling OpenTable was making sure the capital matched the reality of growth expectations. He then shared his fundraising experiences with the crowd; from the early rounds where he recommends building a large network of people with your vested interest around you to the later days where he closed a round of $35 million of venture capital funding only to fire 110 of his 176 employees and shift the focus of the company to profitability.
The decision to focus on profitability was a big internal cultural shift at OpenTable. Templeton transitioned out of his role at CEO and began to reposition the solution being sold to restaurants in a way that made sense, using language they could understand instead of the tech jargon they formally used. The company also moved to a pay for a performance advertising model allowing them to get a critical mass of restaurants and giving diners more options, allowing their two sided business model to succeed.
When looking for investors Templeton measures their value in five ways: can they help us with an exit, re-group, think strategically, guide us from a business development standpoint and invest later. He also recommends creating scarcity by getting to know the investors and making sure that the first interaction with an investor isn’t asking for a check.
Templeton focuses a good part of his energy meeting with entrepreneurs and offering suggestions, helping them to find the right product market fit. Many of these investors are Chicago based. He has kept up with his early ties to the city, a place he calls ideal for transforming industry.
“The community here in Chicago is as vibrant as I’ve ever seen,” Templeton said. “All the ingredients are here: the venture community is growing, there are great institutions, capital, corporate headquarters, all types of customers and you are starting to get more talent.”
He maintains that while social startups may have more success in Silicon Valley, Chicago is the perfect place for industry because of the big data centers located here, traffic flowing through the city and surplus of infrastructure.
His belief in the Chicago tech scene supported his decision to host Impact Engine at 1871. The venture accelerator will help for profit businesses solve financial and environmental challenges. The deadline to apply for the 12-week user-centered design crash course—that will offer a $20,000 stipend—is June 30th. More information about Impact Engine is available here.