Written on February 18, 2008 by Ángel Barbero in Web 2.0


Building Tuenti – the Interactive Address Book

On Monday, February 11 the IE Entrepreneurs’ Club together with Mr. Zaryn Dentzel, its first guest speaker of the year and founder/CEO of Spanish Tuenti, inadvertently set on a path of dismantling common misconceptions. The first misconception is that entrepreneurship cannot be taught – you have to be born with it or inherit it (the family business) from your parents. And the second is that to work in the technology field you have to be a techie yourself. Zaryn is a quintessential example of a self-made entrepreneur riding the wave of new trends of Web 2.0.

Originally from Santa Barbara, Zaryn came to Spain for the first time when he was 15 on an exchange program. Ten years down the road and two internet-based businesses later, Zaryn returned to Madrid for yet another venture. Surprisingly nothing in his earlier years indicated that he would be at the head-front of a leading Spanish online community and social networking web site. On the contrary, coming from a traditional middle-class American family, Zaryn completed his university degree in Political Sciences, training to become an expert in international affairs. Today we find him full of passion and drive and mediating on a very different global arena than that of politics.
Zaryn’s Tuenti (because it’s cool to be twenty) is a highly-successful online community. The site was launched in December 2006 with the aim of “facilitating the flow of information between people”. Painstakingly and partially due to its by-invitation-only policy, the web site slow acquired its initial base of subscribers. Day after day the founders observed a trickle of users sign up and wandered whether they would be able to overcome a grand personal and professional failure. But failure was not on the agenda. Tuenti’s traffic eventually picked up and has registered steady growth ever since in the capital and beyond.
At 24 Zaryn is already a shrewd entrepreneur and diplomat. He politely declines to disclose strategic company information such as the current number of subscribers, names of potential partners, or financial projections. Yet he remains incredibly candid throughout the entire discussion. He is confident, convinced and full of faith. It’s all about serving the customer and giving people what they want – a private online community in which contacts and relationships are more real than anywhere else.
Web 2.0 is going to change the way we interact with each other and according to Zaryn “tools like Tuenti can change the way services and advertising are delivered to people”. He describes his business as a way of bringing one’s address book online and making it interactive. Such an approach reduces the risk of bogus contacts and serves as a basis for expansion. It also opens up the possibility of gathering valuable information about users to deliver a customized service and highly relevant advertising geared towards enhancing the overall social networking experience.
What is particularly interesting about Zaryn, as an entrepreneur, is his broad vision and the ability to avoid many common pitfalls that start-ups often find themselves in. From the outset he preferred to keep control of the company by raising money from family and friends, instead of giving up equity to VCs. This now gives him full freedom in determining the future of the business. He can either choose an IPO or take up one of the highly attractive offers already being made to sell Tuenti.
Sale or no sale, Zaryn sounds like he is growing as an entrepreneur with the firm. Of course at the beginning it was tempting to think too big but he and his team were humble. Tuenti quickly gave up on the idea of splurging on a marketing campaign. Instead it embarked on a strategy of marketing the site internally. It started by targeting a small niche of Spanish university students. This dynamic and highly inter-connected group became the driving force behind the community. For instance, one of Tuenti’s so-called embajadores (a volunteer) recruited as many as 10,000 people to the network.
Besides sheer numbers, there were many challenges associated with running the business and running it in Spain. Two of the most important ones were infrastructure and people. After his experience in the U.S. with being part of an entrepreneurial team that set up a political social network and raised 250 thousand in venture financing, Zaryn had to adapt to a very different environment in Madrid. Finding the right companies to work with was a huge hurdle to a business that wanted to maintain flexibility and speed of response to market trends. Tuenti literally had to educate its server suppliers and bandwidth provider to deliver the kind of service it needed.
Another difficulty for a young company like Tuenti is talent. Good people are hard to find and if found there are typically hundreds of issues, such as visa, travel, etc. associated with bringing them on board. Often Zaryn perceives a lack of entrepreneurial spirit among the people, who show no desire to grow with the company and get involved beyond the extent of their immediate responsibilities. For Zaryn these are palpable concerns as the corporate culture of Tuenti begins to evolve.
For any entrepreneur setting up and running a business is often a matter of considering multiple alternatives and making the right decisions at the right time. Tuenti has already crossed some significant milestones in its development. From the beginning its team decided that it would develop and maintain the site in-house. According to Zaryn outsourcing rarely delivers the desired results. In order for it to be effective the entrepreneur must have a profound understanding of what it is that she wants and be able to communicate this knowledge to the supplier.
Needless to say the biggest challenges for Tuenti lie ahead and are associated with generating a revenue stream and sustaining its competitive advantage. Zaryn understates the extent of competition from players like Facebook, which appears to be a formidable rival to Tuenti especially after its recent launch of a Spanish version of the site. In order to handle these competitive pressures Tuenti needs to decide whether it is to remain a localized network or expand aggressively to the Spanish speaking countries of South America.
As it enters its second year of operations, Tuenti also has to consider the amount of cash it will need to churn through before it can launch its advertising model. At present the site is pristine with not a single banner or commercial link. The question is how much longer can continuous service improvements be sustained before Tuenti runs out of money?
Zaryn thinks in terms of Web 2.0 trends. What are the differences of social networking? Where is the community going? What is the big picture five and ten years from now? Timing is of the essence here. Unless the CEO has something up his sleeve, such as a breakthrough advertising technology, waiting too long before the sale may expose the company and its creditors to greater risks.
By Natalia Corobco


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