Bad time/Good time
Caterina, one of Flickr’s founders, has an insightful post on “it’s a bad time to start a company”. It is a definite worth-reading, along with the comments. One interesting thing I learned: I had no idea Flickr was struggling for survival before being bought; I actually believed they were booming, that the AdSense and the Pro accounts gave them A lot of cash. Seems I was wrong…
So, on one hand we have the over-optimistic posts of angels or VC’s saying “hey, it’s sooo easy to build a company today, all you need is broadband, two computers, a co-founder, rent, and enough Ramen Noodles to keep you alive. Should you succeed you’ll be a millionaire, and if not… you’ll just have lost some weight ;)” . See for instance Rick Segal’s posts on VC2.0 and, most importantly, Paul Graham’s “essays“. Quite the thing to get you excited, isn’t it?
You don’t really want to get me started on Web2.0, do you ?
Caterina is right: everybody got excited. Everybody excited means A LOT of startups. Especially when talking about Web2.0, since the costs are ridiculous: a company just launching its website could manage with 100$/year in webhosting, 3 to 9$/year in domain name, some public-domain graphics, and enough Ruby on Rails as they can handle. And… voilà , your own Flickr, delicious or Reddit.
After Flickr reinvented photo-sharing and delicious reinvented bookmark-sharing, A LOT of Web2.0 startups appeared over-night with Video Sharing, Podcast/Vcast sharing, notes sharing. After Slashdot, there were Digg and Reddit, and after those A LOT of other “collaborative filtering” websites. After YouSendIt, there were DropSend and many other big-file-sharing. Something is fishy….
Caterina is right, even the best signal gets drowned in a sea of noise. Thousands of startups, with hundreds being launched every day.
As for me.. I only use about 5 Web2.0 websites(Gmail, Bloglines, Flickr, delicious and sometimes GoogleVideo). My friends and relatives use even less. Human mind can not deal with more than 7 signals at a time. Among all the thousands of startups or webpages launched lately, even the good ones will get overlooked. They will count themselves lucky to have a thousand of returning visitors. As for the paying customers… God help them…
What about other kind of IT startups, not Web2.0-related?
Web2.0 is easy: Php, Ruby, Rails, Ajax… they all sound weird but, on an entreprise-level scale, are gimmicks. Sure, you need to know programming and stuff, and you work hard to build your app. But the real added value is little, and gets smaller with every new startup in the field and with every new tutorial showing how to do a clone of Digg or del.icio.us in 10 minutes or less with one of the amazing Web2.0 frameworks available.
The problem is when you try to do value-added stuff (a word used in the software consulting world meaning the extra domain knowledge added by consultants, and the tunning of the software for the customer’s precise needs). While in the Web2.0-field every Internet-addict can read tutorials and references to get started on a “revolutionary” startup, in any other field tutorials are scarce and most things can’t be learned in 1h lessons. Hey, you might even need to go to college to learn Maths and Finance, Physics or Electronics. Sometimes you might need to have a Phd to really come with added value for a given field…(think Google’s Phd’s in Algorithmics and you’ll see what I mean).
So? Is there a solution? Web2.0 businesses are simple to start, but there is so much competition that chances to be remarcable for customers are close to null. IT-startups in non-IT fields need a lot of specific-field knowledge, and their targets are usually very narrow niches.
I have no idea on the solutions; probably you’ll get lucky and become the new Digg or even the new Google. Or maybe you’ll just have to broaden your knowledge and try to tackle some exotic niches as well. Who knows, maybe the jackpot is hidden somewhere along the long tail….
Update
Radu pointed me to a great post by Jason Calacanis on the same topic. Pretty much the same ideas, only in a smarter and more informed way than me. I can only agree with him: alghough I won’t like it, I can hardly wait for the winter to come: winter being the time when people will get sick of all these free but unstable web apps, and only the best ideas will survive.
The perfect time to launch a startup is in the winter; SixApart did it, Flickr did it, Weblogs. Inc did it, Google kind of did it. If you survive the winter, then in the summer you can be big.
Great article. You are 100% right.
Thanks Vladimir.
I wouldn’t be completely honest if I didn’t also point out the reply from the 37signals guys over at SVN.
For those not knowing them, they are one of the few Web2.0 startups doing great (I know, they’ve been around since the late 90s but still, they set an example for Web2.0 and are among the few who made a successful switch to Web Apps and paid services).
Their answer? Not very different from the things Paul Graham says: low costs mean no VC needed, meaning anyone can start a Web2.0 business if he has the passion.
My point exactly: everyone WILL start a Web2.0 business; the chances MY business will be noticed among the other millions? NULL.
I think the main problem here is usefulness… 37 Signals created something valuable… so did Flikr. But most of today 2.0 start-ups are just technological previews (they call it BETA). Creating value to the user is what matters the most. And right now many of them are just creating great user experience (we jave Ajax and Ruby and Flash don’t we? ) for nothing.
hmm - calacanis’ post is must-read too.
http://www.calacanis.com/2006/03/26/time-to-start-a-business-or-not/
Truth is somewhere in the middle… BTW, I missed the struggling part of Flickr - only saw “Flickr was at break even — about to tip into the black — when we were acquired”…
Radu, thanks for the link.
As for Flickr struggling… maybe my English skills are not that good ( ;-) ) but… that’s what “Flickr was at break even — about to tip into the black — when we were acquired.” means for me. :D
I guess it’s ok to start something in a market where everybody does the same thing if you have another advantage for instance powerfull links (to be a Connector it’s certainly very useful).
Otherwise it’s best to attack a niche and become very strong in something (that you probably like a lot) so it is very hard after that for someone to copy you.. my 2 cents
What all these Ra ra startup! zealots forget to mention is that you need an idea first… Me-too startups will rarely succeed.
What google, flickr, blogger and such have in common is that they all inhabit an obvious-in-hindsight niche and a good idea on how to exploit this niche. What they also have in common is once this niche has become succesful, there is no point in trying to establish yourself in it, as everybody will be using the first service to exploit this niche. Your startup will no dethrone flickr; that needs a Microsoft to do so.
Well said. The only people who are promoting “web 2.0″ are the people who think it’s something and media people who have been already brainwashed.
Marquee, you’ve got a great blog over there.
As you’ve read above, I agree with you that there’s simply TOO MUCH FUSS around Web2.0, but still, one can’t deny what Web2.0’s merits have been: fewer popups, fewer marquees :D , much easier-on-the eyes design, and some cool ways of expressing yourself (blogs, flickr).
Web2.0 is over, and entrepreneurs should really get this into their minds. Web2.0 is gone, it’s been gone for almost a year now.
Anybody trying to launch a Web2.0 product should understand that just using Ajax, cooler webdesign and lots of broadband doesn’t make a hit.
There is something around called “usefulness” and if a product is just a knock-off of another one, cheaper and more stylish, perhaps with two features more, it won’t make it a success. That’s all there is to it.
The lesson of the day is business before technology. I bet lot of business folks don’t care if you are using Web 10.0 as long as it makes $$$ for them.
The bottom line is, to be substainable, your product/service must create value for other businesses and they are willing to pay for it.