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Olark discovers raising prices leads to rapid growth

Olark has four founders but the software startup owes its current success to far more people than that.

First off there are its 35 employees, including 11 new hires over the last year. While much of its staff works remotely, a large chunk of them work from the firm's office in downtown Ann Arbor. And then there are the fellow graduates from the University of Michigan a majority of Olark's founders graduated with.

"We are pulling inspirations from a lot of different sources," says Zach Steindler, co-founder & chief Olarkitect for Olark.

Olark creates software that makes it easier for people to interact on the Internet. For instance, it enables customers to directly contact a business representative through the website of that business.

Olark was founded by four people, three of which graduated from the University of Michigan about 10 years ago. Steindler graduated in 2007. That group of guys went on to launch Olark out of the Y Combinator in Silicon Valley, one of the most prestigious business accelerator programs in the world. The online messaging startup started in Silicon Valley but soon opened an office in Ann Arbor (its second largest) shortly afterward.

The 6-year-old startup never took seed capital. Partly because its team knew it could bootstrap the creation of the software, and partly because not many angel investors or venture capitalists were doing much investing at the height of the recession when Olark was starting to assert itself. More importantly, it saw that some of its peers in software didn't need the seed capital to build their businesses.

"These were people we held in the highest regard," Steindler says. "They were so smart. We thought we could do this, too."

One of Olark's inspirations is Dug Song, a U-M graduate and fellow serial entrepreneur in tech working out of Ann Arbor. While Song’s current Internet security startup, Duo Security, took several million dollars in venture capital, he was still advising Olark as it worked its way through its growth curve.

"He helped answer tough questions we had about building a team and doing those sorts of things," Steindler says.

Among the advice Olark's friends have given it is focus on perfecting its product, so Olark's team spent 18 months on product development. When they started selling the company's platform, they priced it low to better compete with existing players in the space. It didn't start growing right away at least until the company raised its prices.

"I think people had a hard time taking it seriously if it was priced that low," Steindler says. He adds, "We had this combination of quality and price that really helped us accelerate our growth. (Before that) our savings were dwindling. I was thinking how long until I have to get a real job? Then we hit that moment and things just took off."

Welcome to the Year of the Gazelle, an exploration of the fastest-growing startups in southeast Michigan by the Startup team and the New Economy Initiative for Southeast Michigan (NEI). Not only will we identify the local gazelle companies that are perfecting innovative new products, creating jobs, and generating lots of revenue, we will give you a full accounting of each one. The stories behind the entrepreneurs that build these businesses. The investors that back them. The resources they leverage. How they have all worked together to build Metro Detroit's new economy, and how they plan to do it in the future. In return we will only ask you to do one thing: keep up.

- Written by Jon Zemke

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