Mashable - The Social Media Guide - Latest Comments in Startups, it’s Time to Stop Calling Yourselves That

Re: Startups, it’s Time to Stop Calling Yourselves That

John J — Sat, 11 Oct 2008 13:54:38 -0000

I guess we shouldn't call all those companies on Wall St (with all those employees, offices, etc) businesses since it turns out they weren't making any money either.

Re: Startups, it’s Time to Stop Calling Yourselves That

Berislav Lopac — Sat, 11 Oct 2008 06:29:50 -0000

Stan, just a few thoughts from your own neck of the woods:

1. I don't think we'll see a significant downsizing of VC and angel investments. Those funds are provided by people with extra cash, and that cash isn't going anywhere (unless, of course, they weren't smart enough to pull it out of banks before they went down, in which case I'd rather not to be funded by them anyway). The opportunities to increase your wealth through investing are being severily reduced -- real estate market is going down, stock markets are going down, etc -- and even a risky investment opportunities such as startups have a much better chance of a good ROI as opposed to those traditionally safe investment targets.

2. This is not dotcom bubble burst, this is a completely different kind of crisis. At that time we saw a bubble growing and bursting in a single industry -- online technologies -- while the rest of the business world was doing quite fine, even after 9/11. And the bubble was actually an anomaly -- if you discount it from the financial charts you will notice that the general trend of online industry was steadily upward, and we have now reached similar levels of investments as seen during the bubble, only more widespread and without the feeding frenzy we saw then. And besides that -- people will always invest in technology, and especially online technology is such a young field that there is still more than plenty of room for innovation and even non-innovative opportunities there

2a. Any startup which is not prudent about the way it spends its cash is certainly doomed, and rightly so. During the dotcom bubble we have seen plenty of startups with extreme burn rates, but as I said above it was an anomaly -- a pre-revenue company simply can't afford to overspend.

3. The best moment to invest to a startup is in a downtime. First, most startups need three to five years to develop a product and reach a level of maturity where the investors can reap rewards (through trade sale or IPO). If we look back, we can see that some of the most successful technology startups were established in the time of the post-bubble "nuclear winter": the examples are Google (1999), Facebook (2004), YouTube (2005) and Skype (2005), to mention just the e few. Second, no crisis lasts forever -- if we learn from history, we'll see that even the Great Depression lasted no more than a decade. The world today has much more mechanisms to control the crisis than were available in 1930s -- one of them is effective global communication being enabled exactly with online technologies -- so it will likely last just as long as it takes a new technology to grow useful.
4. And finally, I would like to once again add to the differentiation between projects and businesses; or rather, I'd like to use the term "innovations" instead of projects. When you're starting up, there are only two things you can possibly be building: one is an innovative technology (or an innovative process, or a way to do business, or something else; the key word is "innovative"), and the other is sustainable business. If you're lucky, you're doing both (like Google or SpinVox did), but it's nothing wrong if you just have a new technology without a business model, or are copying an existing business model on a new market. The point is to have at least one clear, easily identifiable points where you differentiate from others in the market; this point of differentiation -- or competitive advantage, as they often call it -- can be a proprietary (but superior!) technology, or an underserved market, or even simply a better process allowing you to be significantly better/quicker/cheaper than the competition.

It is not important whether you build your company with a clear business model, or you're just developing a killer technology and don't want to think about how it will be used; the only problem is if you're deluding yourself that your competitive advantage is significant enough to make a difference. If you're making a Facebook-clone which differentiates only by being in a language spoken by four million people, you're in for a rude awakening.

Re: Startups, it’s Time to Stop Calling Yourselves That

Ben Parr — Fri, 10 Oct 2008 12:40:33 -0000

Absolutely true. My thinking goes Project --> Venture --> Business/Startup

And LJ, absolutely right - I despise it when a person calls themselves CEO just because a piece of paper they filed says so. I used to be that, even. *sigh*

Re: Startups, it’s Time to Stop Calling Yourselves That

Jason Kintzler — Fri, 10 Oct 2008 12:28:57 -0000

Curious Stan, how many startups (web or otherwise) have you built?

Entrepreneurs are up against all sorts of obstacles as it is. I would argue that now is perhaps a better time than any other for a hungry firm to take chances and have an impact. Who are you to define what "startup" means? Seriously, nice attempt at a relevant economic tie-in piece for mashable, but it's lacking. Where's the proof in numbers about startups with 2 and 3 people vs. startups with 50+ people and VC backing?
My guess is more of VC backed startups fail than the ones that start small. Business is selling lemonaide on a street corner here in the U.S. - most times that's done by a 12 year-old with the ability to make change.

Re: Startups, it’s Time to Stop Calling Yourselves That

Matt — Fri, 10 Oct 2008 11:56:15 -0000

I like how you differentiated "Start Up" from "Project" as there are a number of sites out there that are just that. I'm not so sure I agree with what you would consider a business though. Businesses come in all sizes, and just because you don't have 1,000 employees doesn't mean you are not a business. In fact there are thousands of one person businesses making tons of money on sites like eBay or Craigslist. My company, while very small in comparison, is working to convince some of those sellers there are more options.

I just hope that we don't have to hire our 1,000th employee to be considered a business.

Re: Startups, it’s Time to Stop Calling Yourselves That

LJ Jones — Fri, 10 Oct 2008 11:16:23 -0000

The only thing worse than calling a "Project" a "Start Up" is when the person who came up with the idea for the project starts calling himself a CEO. You are not a CEO until you have made money and have fulltime employees. A one person operation/project does not make you a CEO.

And I don't think you are being pessimistic. You are being realistic. Getting a project of the ground is difficult. Many a good idea has failed.

Re: Startups, it’s Time to Stop Calling Yourselves That

Gregory Magarshak — Fri, 10 Oct 2008 10:58:54 -0000

What happens when you have a fantastic idea that will take you a year to execute on your own, but with the proper funding and ability to hire a team, would take you 2 months? What if you don't know anyone who would be a good investor? By the time you do it all yourself, the opportunity may be gone. That's the situation I'm in with my friends. We are building a social network for real life.

www.freemeet.com

It took me about 9 months to build a new kind of back-end technology (in PHP) to support this site, and I estimate it will take me 9-12 more months to build a beta. We've got all the facts, figures and business plan for this project. What do we do now? How do we find a possible investor? I'll keep slowly building it out, but I'm afraid the pace is too slow, which is definitely a shame.

Re: Startups, it’s Time to Stop Calling Yourselves That

Michael E. Gruen — Fri, 10 Oct 2008 10:43:20 -0000

Nice differentiation--

...unless your project is funded to be sold ("invested") to a VC, then your business is creating a product called a startup.

But, generally, you're right. My bet's on boring cost-saving businesses taking the prize these coming months.