Connecting the dots ...
Now is a Great Time to Join or Found a Startup –says Bob Warfield, friend and fellow Enterprise Irregular. Now what? Who is right? And the debate does not stop here, it sparked a pretty good discussion in the Enterprise Irregulars group. I think both sides are correct. It’s a Great Time and It’s a Terrible Time… read my take on CloudAve.
The New York Times presents the perfect showcase for what I’ve been preaching in my recession / business models mini-series:
The showcase compares Twitter vs. Yammer and their categorically different approaches to business.
Twitter is the leading micro-blogging service – they have a strong brand with zero revenue.
Yammer , riding on Twitter’s coattails has followed the exact opposite model: focus on revenues from Day One.
Is one model better then the other? Are they both sustainable, especially in a downturn?
I’ve never particularly liked Uncov, the anti-web 2.0, anti-startup, anti-everything rug. Not that it was always wrong: it’s criticism was often well-deserved, just a bit too vitriolic for my taste. But vulgarity is popular, and titles like I’m Going To Scale My Foot Up Your Ass certainly grabbed attention.
Of course it’s always easier to criticise than actually build, and for Uncov editor Ted Dziuba the opportunity to put his money where his mouth was came when he finally launched his own startup, Persai – soon renamed Pressflip. To focus on the startup, Ted and his fellow authors shut down Uncov.
Will Pressflip make it? Too early to say, but TechCrunch wasn’t too positive about it a few months ago. (they can always rebrand it again, this time to Pressflop).
A few days ago Uncov came back to life, but with a twist: it opened up to guest bloggers. And here’s Dziuba’s Ars Poetica, which perfectly sums up why I still dislike Uncov:
If you want to blog at uncov.com, it should be in the style of Uncov. It doesn’t have to be technical or nerdy, and you should feel free to take shots at people, so long as you do it in the Uncov fuck-you-and-everyone-that-looks-like-you fashion.
The latest twist in the story: Ted Dziuba has just quit Pressflip.
I’m leaving for personal reasons: mostly because I’m going to be a father in March and need some stability, but also because I’m tired of the fight.
The announcement is on Ted’s personal blog, not Uncov. It probably does not meet Uncov standards. For the first time Ted Dziuba sounds perfectly normal. Family man. Human.
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Too bad I am not. Which is why I don’t qualify for this all expenses paid trip to Boulder:
And the pitch:
Boulder Needs More Kickass Developers
Want a FREE trip to beautiful Boulder, Colorado? The Boulder tech scene is growing like crazy. Twenty of our top tech startups (you can see a few in the sidebar) have banded together to fly in one hundred top software developers, programmers and engineers from across the country, all expenses paid. You can apply to be one of the hundred.
So here we go, getting our daily dose of layoff news, while Boulder startups are in shortage of talent. Good developers are still worth gold … somewhere. (They mine gold in Colorado
)
Developers. Not Management, Marketing, Sales – not the MBA’s. And that’s the clue to understanding a lot of the differences between the startup world we have today and during the late 90’s bubble.
Back then startups got VC-funded and part of the deal was bringing in “pro” management teams: the MBA-types and former corporate Executives who flooded the Valley in the hope of IPO-riches. Founders found themselves in VP / Director positions, or got pushed out, if not, they were left wondering how their little baby got to hundreds of employees so fast and just what all these new managers were doing with their company. Then the bubble burst, and the imported Exec’s rushed back to the safety of the corporate world leaving the wreckage behind.
Today most Web 2.0 startups are run by the original Founder, often a developer him/herself. This is now the age of the technologist, not the business manager. The roles are reversed. These CEO’s, Founders, team members won’t jump ship – the ship is theirs, and there’s nowhere to run back anyway. One more reason to be optimistic about their survival.
In the meantime, here’s a preview of what it’s like to work in Colorado, also home of TechStars and Defrag (use discount code zoli1 to get $300 off @Defrag)
(Originally posted @ CloudAve. To stay up-to-date on SaaS, Cloud Computing and Business, grab the CloudAve Feed here)
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TechCrunch Turns Into F**kedCompany 2.0 – says Dare Obasanjo.
Really? Tell me something I don’t already know. Have we all forgotten that TechCrunch acquired FuckedCompany.com over a year ago? OK, that was just an April Fool’ s Joke , but you can really say TC is unprepared for a downturn – after all, they own FuckedCrunch.
OK, on a more serious note: I also said, way back in January 2007 that TechCrunch Did Not Build it; It Can’t Knock it Down Either:
TechCrunch did not build this boom. Yes, a well-timed review helps a startup gain initial traction, but Mike does not make those companies successful: whether they make it or not, they do so on their own. And when they fail, they fail own their own merits, too. Failures are part of business reality, and reporting on them only makes TechCrunch balanced. Without it Mike would be just a biased cheerleader (something he was accused of in the past).
I still mean what I said there, except that in the downturn there will clearly be more failures, and it won’t always be on a startup’s “own merits”. Reporting on them is part of reality.
But what I really hope for is that TechCrunch and other influential blogs that are a strong part of the startup ecosystem will take a constructive approach, and instead of becoming doom-reporters they start discussing ways of survival – i.e. how to tweak one’s business model to establish a healthy revenue stream.
I’ll have more on this soon.
Update: I’m often amazed at the image selection Zemanta proposes. The word “train” does not once occur in my post, yet it recommended this image of a train-wreck.
Lot’s of noise today, RIP Good Times, IT’S OVER! POP GOES THE BUBBLE, Sorry, Startups: Party’s Over etc. I think the panic is overdone.
Sure, a lot of startups will fall – and some of them would have done so without a recession anyway. Times are officially tough, but the truly strong businesses will survive, and some of the Web 2.0 whiz-kid baby-CEOs will come out of this as battle-hardened Entrepreneurs.
Talk about Executives… some can wreck the business on their own, they don’t need a crisis: see Entellium wrecked by fraud.
Finally some startups think they can keep on re-architecting forever – see NetBooks, ViewPath (the latter just came out with a new product though.) Good luck to them… wonder if their market runs away…
These are some of the thoughts I’m discussing on CloudAve today – read more here. Even better, grab the feed here.
Update: Want to get off the “Sky is falling” treadmill? Need inspiration? Find it here.
Even better, get really inspired at Defrag. Use discount code zoli1 to get $300 off.
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Fincancial crisis or not, VC investments did not entirely disappear, it’s just getting increasingly difficult to get funded. But VCs are still on the lookout, and as proof I’ll be moderating another SVASE VC Breakfast Club meeting this Thursday, October 2nd in San Francisco.
As usual, it’s an informal round-table where up to 10 entrepreneurs get to deliver a pitch, then answer questions and get critiqued by a VC Partner. We’ve had VC’s from Draper Fisher, Kleiner Perkins, Mayfield, Mohr Davidow, Emergence Capital …etc. This time we’ll welcome Peter Morrissey, Managing Director, Hambrecht Geneva Ventures.
These breakfast meetings are a valuable opportunity for Entrepreneurs, most of whom would probably have a hard time getting through the door to VC Partners. Since I’ve been through quite a few of these sessions, both as Entrepreneur and Moderator, let me share a few thoughts:
Here’s the event info page, and please remember to register the next three Entrepreneurs get in free, contact me here.
See you in San Francisco!
Reading that TechCrunch calls Yotify “Google Alerts on Steroids” I had great expectations… that did not last long. For now, it’s a no-go… read my quick review on CloudAve.
Are we heading into Recession? The “Big R” talk of early this year quickly subsided, economic growth returned, the markets appeared to vindicate the optimists. US Presidential Candidate John McCain repeatedly said the economy was fundamentally strong… until just days ago, when he quickly switched to declaring a crisis. The Wall Street Journal says we’re in the Worst Crisis Since ’30s, With No End Yet in Sight.
I don’t claim to be an expert economist, so whether the Big R is looming is not my call – but if you believe we’re in a strong economy, I have a bridge to sell you. Let’s just focus this discussion on how Software businesses can survive in a financial crisis, which is undeniably here.
Not all will survive, and it’s probably healthy they won’t. Tim O’Reilly, Father-of-all-things-Web-2.0, asked the question at the Web 2.0 Expo last week:
Global warming. The U.S. losing its edge in science and technology. A growing income gap. “And what are the best and the brightest working on?” O’Reilly asked, displaying a slide of the popular Facebook application SuperPoke, which invites you to, among other things, “throw sheep” at your friends.
“Do you see a problem here?” he posed, showing another slide of the popular iPhone app “iBeer,” which simulates chugging a pint. “You have to ask yourself, are we working on the right things?”
The poster-child of the Web 2.0 boom may very well become the symbol of what went wrong:
Actually, the problem is not what they do, but how seriously they were taken. Will Price, a very smart VC said long ago:
It may well be that Slide raising $55m from mutual fund companies at $500m+ pre-money will be the “what were we thinking” moment of the current cycle.
I’m glad they did not go public, at least not a lot of people will get hurt holding the bag. But enough of what’s wrong, here’s what works:
The last point brings up the price issue. Credit will dry up. Whether we’ll officially declare Recession or not, the fear of the Big R is enough for corporate budget cuts, the disappearance of any CAPEX spending. Even worse, an entire sector almost disappeared as IT buyers. Did you know that Lehman Brothers spent over $300M on IT in just the last quarter, right before declaring bankruptcy? How do you sell in this environment?
The after-bubble nuclear period of “no IT spending at all” found me at a startup in 2001-2003. We did not exactly hit it big, but did not go under, either, and that’s because our model allowed us to get in the door way below the threshold that would have required higher authorization. Not classic SaaS, rather SES (Software Enabled Service), we were essentially data providers and often got into an “enterprise” account at $3k for the first month … eventually ramping up to annual $60-$100K. Anyone familiar with Enterprise Sales knows the term Economic Buyer: typically getting involved later at the sales cycle, approving or nuking the deal. Well, we saw no Economic Buyer: being under the threshold, we sold to the User directly.
Of course my little business is not the only proof: Salesforce.com & WebEx thrived during the last recession. The secret is the business model: pay-as-you-go. SaaS offers lower risk to enter, no initial cash layout, the subscription fees come out of OPEX vs. CAPEX, and is often approved by the User, not the mysterious Economic Buyer. The barrier of entry is much lower: once you’re in, it’s up to you to grow.
In fact I suspect the looming downturn will accelerate the structural changes in the software industry: SaaS players will thrive, traditional on-premise vendors will shrink, many will disappear.
That leaves a final point to discuss: financial solvency. For startups, it will be increasingly hard to find investors. For larger businesses the lack of late-stage investment, the credit crunch may be a serious impediment to expansion. Discover the beauty of bootstrapping – you actually get to do what you believe is right for your business, not what your Board tells you. Do less, take small steps. Frugality is key to survival. Small is beautiful will get a new meaning.
In summary, Software businesses that combine good old business sense: frugality, spending wisely, delivering value to businesses and getting paid for it, with a new business model, SaaS are likely winners in the downturn. The rest are playing musical chairs. (Oh, and the bridge is still available)
(This post originally appeared on CloudAve. Keep informed by grabbing our feed here.)
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We can argue all we want about the benefits of SaaS, discuss hypothetical use cases at length, but the best showcases are served up by real life, often unexpectedly.
A startup CEO friend asked me to take a look at his PowerPoint deck before he would send it to a VC. (Incidentally, I don’t believe presentations should be sent in advance of a meeting: if your deck has enough content to convey the message standalone, than it’s not a presentation… but let’s put that aside for now.) I agreed to help, and he fired off an email with the PPT attachment.
Too bad I could not open it. I have MS Office 2003 on my Windows computer – that’s the last version I purchased, since moving to the Cloud, and I won’t buy an Office package ever again – and he has Office 2008 on his shiny Macbook Air. (Standard issue for hot startup CEO’s in San Francisco?). Yes, I know there’s a converter thingie I can download from MS, but apparently I haven’t done it on this particular computer, so my friend quickly saved it for me in the older format.
I reviewed and commented on it, and as an aside noted that the fonts and the text alignment were way off on a page. He did not see the text problem on the version I sent back. Then came a second round of conversions and emails. It became apparent that no matter what we do we always end up seeing different layouts – so much for the MS to MS conversion – so we just focused on content, and I sent back the revised version. It took a while… hm, no wonder, the PPT deck that started it’s life as a 2MB file first became 5, then 7, finally 9 Megabytes. Wow!
What an inefficient process! Emailing multiple bloated copies of the same file, never seeing the identical version, leaving quite some footprint behind, when we could have started with an online presentation, collaboratively work on the one and only copy online, see the same and not clutter several computers with the garbage files.
I will come back to this in a minute, but here’s another benefit my CEO friend missed out on: providing the latest and greatest information. The VC Partner he was talking to was about to to go on vacation, and she was planning to review the presentation in the next 2 weeks – who knows when. This startup was at the time in advanced discussion with major prospects, and signing any of those deals would materially change the presentation. Had my friend sent just a URL to the online presentation, he could have safely update it any time, and be assured that whenever the VC reviews it, she will always have the latest and greatest information. Does this scenario ( sans the VC) sound familiar? How many times have you hit “send” only to wish you could retract the email and replace the attachment with the correct version?
Back to the storage footprint issue. On my count, just between my friend and myself, we generated and stored nine copies of this presentation, the last one being 9MB, up from 2. It’s probably fair to assume a similar rate of multiplication in the process the original deck was created, between the CEO and his team. Next he sends it to the VC, who will likely share it with several Associates in the firm, and in case there’s more interest, with other partners. Of course my friend will send the same presentation to a few other VC firms as well, so it’s not beyond reasonable to think that there are at least a hundred copies floating around, occupying a Gigabyte of storage or more. Oh, and I did not even consider the footprint of this presentation at ISP’s and all hops it goes through. Not that I ever bought into IDC’s Storage Paradox, but this is clearly a very wasteful process.
All of that could be replaced with one central copy on the Web, represented by a URL.
Oh, and the irony of all this: my friend is CEO of a GreenTech startup.
(Cross-posted from CloudAve. Follow our CloudAve Feed for more)
Publisher / Editor of CloudAve and Enterprise Irregulars.
I do most of my business blogging there, with occasional asides here. More...
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