March 29, 2024

Coffee and Power Site Aims to Get Jobs Done, Bit by Bit

Now he wants to change the nature of work.

While Second Life is still around, it never lived up to its hype. But Mr. Rosedale, 43, is back with a new business called Coffee and Power, where people buy and sell most any kind of task, like making Halloween costumes or writing sophisticated software.

To prove his point that a work exchange could function, Mr. Rosedale built the software for his new company by hiring programmers from around the world and dividing up the work into about 1,600 individual tasks, from setting up databases to fixing bugs.

“We think it’s the new model for how software will be written,” he said. “It worked so well that we decided to extend it to all sorts of work.”

Coffee and Power has storefront space in a nondescript part of San Francisco’s Market Street where people can drop in and offer to do jobs or hire people for tasks. They can even start working together on the spot. Mr. Rosedale works upstairs, along with a handful of full-time staff members.

On a recent day, the public space had three groups of people making use of the human and laptop fuels behind the company name. The groups were working on software projects, business planning and tutorials.

As with Second Life, the business has a virtual currency for buying, selling or bestowing tasks as gifts. Coffee and Power takes a 15 percent fee for moving the money back into real dollars.

The site has been active since spring with little fanfare. It attracted fewer than 700 transactions, but is now starting to actively solicit buyers and sellers.

“About 25 percent of our site is needs, and the rest is offers,” Mr. Rosedale said. “We’ll need about 10,000 jobs before we know what the final balance is like.”

Other online services have similar ideas — Task Rabbit, Freelancer.com and Amazon’s Mechanical Turk among them. One of the striking things about these services is how inexpensive it is to get something done.

Translation services on Coffee and Power currently sell for $10 a job, and a bike messenger can be had for $15. Much of the time, the people involved are already in these professions and are looking to make a few extra dollars on the side.

Besides putting downward pressure on what people can charge, the low prices also raise questions about the quality of the services. That is one reason that Mr. Rosedale is publicizing that he used cheap labor to build his own site.

He paid about $200,000 to build Coffee and Power, he said, using an earlier version of the service called Worklist. Every step in the development process is visible on the site, including the amount people have been paid for their work. An Australian working under the name Lithium has earned $46,523 since January, for example.

Another test project, called Hudat, is an iPhone application that converts pictures of Facebook and LinkedIn friends into online flashcards. The idea is that a person can review images before attending a party. It cost $2,600 to build, a fraction of what work like this normally costs, and was built in two weeks. The process is open for anyone to see.

“We work on total transparency,” Mr. Rosedale said. “If you don’t want anyone to see what you are working on, this is not for you.”

Second Life, in its heyday, held similar promise. While it became notorious for sexual chatter, it has over the years attracted a Reuters news bureau, now defunct, as well as emporiums of several companies like American Apparel and Starwood Hotels. Cisco Systems also held meetings there. Second Life still exists, but is much quieter now, offering virtual currency, meetings and digital real estate, among other services.

While he is still chairman of Linden Lab, the company that created Second life, Mr. Rosedale talks about that venture in the past tense.

“The problem with creating an immersive 3-D experience is that it is just too involved, and so it’s hard to get people to engage,” he said. “Smart people in rural areas, the handicapped, people looking for companionship, they love it. But you have to be highly motivated to get on and learn to use it.”

Mr. Rosedale, who raised about $1 million for Coffee and Power from investors including Jeff Bezos, Catamount Ventures and Greylock Partners, sees the trend of breaking work into smaller pieces — both in software and for physical tasks — as one that will continue to gain traction.

“I would rather hire a kid in Brazil who is hungry for work for a project than hire a Stanford graduate,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=269317411a0d65b0f7c3784347acc27e

Case Study: Kopp’s Cycle Struggles to Get Financing

THE CHALLENGE Obtaining a $1 million loan to refinance the mortgage on the bike store, pay down credit card debt and obtain working capital.

THE BACKGROUND Kopp’s Cycle operates out of a small storefront on a quiet side street in downtown Princeton. Behind the counter is a repair studio that is lined with old wooden bins and is just big enough for three mechanics. Mr. Kuhn still sits at the workbench he used when he was a child working for his father, though the shop has moved several times in the intervening years. In the summer, there is room for two or three mechanics on the porch out back.

Kopp’s moved to its current location in 1989, when Mr. Kuhn and his sister bought the business from their mother. (Mr. Kuhn bought out his sibling’s interest in 1999.) In 2004, he bought the building for $801,000 with an adjustable-rate loan for $775,000, guaranteed by the Small Business Administration. By 2007, though, the rate had risen about three percentage points, to 10.75 percent. Moreover, Mr. Kuhn had grown tired of the paperwork that dogs an S.B.A. borrower. “I just didn’t want to dedicate hours of time putting together annual statements for them,” he said.

So Mr. Kuhn refinanced with Washington Mutual (“I sent them a copy of our tax return, and that’s all they wanted,” he said), signing on to a seven-year loan for $825,000, with interest fixed at 6.18 percent.

The loan is amortized on a 25-year schedule, however, so when it comes due in fall 2014, Mr. Kuhn will have to make a balloon payment of $775,000. (Balloon payments, typically refinanced at term’s end, are common in commercial real estate loans.) At the time of the loan, the store and its lot, the loan’s collateral, were appraised at $1.3 million.

In the intervening years, Kopp’s business has been battered. The effects of the recession have been intensified by online competition. Mr. Kuhn started noticing customers coming in with products bought elsewhere that they had browsed in his store.

“People come in with their smartphone and scan a bar code on a product that I have in my showroom, and what comes up on the phone is the three closest places and their price and then also what it is on Amazon,” he said. Revenue fell from a high of $485,000 in 2008 to $393,000 the next year. Mr. Kuhn kept himself afloat by borrowing on his credit card, mostly for personal expenses but also to buy inventory.

To rebuild sales, Mr. Kuhn cut prices on accessories, which — typical for a bike store — have provided most of his profits, Mr. Kuhn said. This lifted revenue to $473,000 in 2010, but profits fell sharply — Mr. Kuhn said his margin was just 1 percent last year, compared with 10 or 15 percent in 2008.

This has not greatly concerned him, he said: “When I get the books done at the end of the year, if I break even — if I don’t show any loss, and I show a little profit — as long as my guys are getting paid, all my bills are getting paid, and I’m getting paid, then I’m O.K.”

Mr. Kuhn adjusts his salary as necessary to keep the profit small. Also, he and his wife personally own the building and rent it to the store at a rate that exceeds their mortgage payment.

But the 12 percent interest rate on $100,000 of credit card debt has grated on him, as did the prospect of the balloon payment now three and a half years away. The solution, as he saw it, was a new 25-year loan that would consolidate the credit card debt with the $800,000 outstanding on the property and add $100,000 for working capital. He anticipated that the property’s value had risen to $1.5 million, enough to support a $1 million loan.

Article source: http://feeds.nytimes.com/click.phdo?i=c1ca37c2a41c9efaccef2eee3c2cbca6