Let’s get things started
Caterina Fake wrote a post the other day called “It’s a bad time to start a company.” By this she meant an Internet company. She makes some reasonable observations about the tightening of the job market in the Bay Area, the increased competition, and how “Web 2.0 isn’t all that.” Anybody who lived through dot com bubble must’ve had some of these same thoughts. We bubble survivors are well conditioned to go into skeptic mode when the hype machine gets loud.
Indeed, there’s a lot to be concerned about in the economy of Silicon Valley. More than anything, we tend to get ahead of ourselves with our “next big things,” whatever they happen to be. Many of the businesses from the late ’90s weren’t fundamentally wrong in their premises, but they were hopelessly off in their timelines for market adoption. Online advertising did mature into a sustainable growth business. Broadband content did become mainstream. E-commerce has emerged as a fundamental retail channel. But it’s taken time. Time and patience.
The businesses that thrived post-bubble bootstrapped for the most part, and let the market tell them where they needed to be. They didn’t focus on hitting the “hockey puck” revenue curve or fitting into a sexy high-growth business category, but instead followed the money and refined their products to fit. Avoiding the VC pressure cooker enabled them to take their time in figuring out what their business was.
The Internet has become fundamental in our daily lives, and there are countless opportunities to build a successful small to medium-sized business with it. The answer is to make the technology support our focus on customers (rather than the other way around)–what problems do customers have that we can solve for them? For any given industry or consumer activity, there is some pain point that is completely under-served. Our job is to find out what it is and fill that need.
(Alternatively, we can find a new way to entertain or add some joy to a mundane activity. But these aren’t as sure-fire recipes for success.)
As for Caterina’s other critiques:
- There may be a surge of new Web applications and startups, but that’s not the issue for starting businesses. It’s whether there’s an underserved market need. This doesn’t mean we have to find opportunities with zero competition. As Measure Map showed with its foray into the well-established web analytics space, we can build breakthrough products by focusing on the needs of a sliver of the total audience (they focused exclusively on bloggers). I know an entrepreneur who is building software for documentarians to manage masses of video content. I know another who has spent the last five years building specialty information hubs for biotech researchers, and both their businesses are booming.
- On investment bubbles. I know businesses are getting funded more readily these days, but there is no IPO bubble, and it’s not like we’re seeing a giant number of super-rich acquisitions. So far, the market is doing a good job of keeping the supposed bubble 2.0 from getting bigger than the VC petrie dish.
- Talent may be scarce, but teams can remain quite small. It’s a big difference from five years ago. In addition to cheap infrastructure, open source software, best practices, and streamlined frameworks, we are collaborating a lot more. Cooperation within communities is not a distraction, it’s an entrepreneurial style. And a powerful one at that.
- Caterina is right to pick on the view of Web2.0 as a checklist of features and design patterns. They’re largely irrelevant in their business impact. However, let’s pose a different question. Are we seeing new classes of solutions emerge as a result of emergent modes of communicating, publishing and collaborating? I think the answer is obvious. Industries and entrenched players are increasingly defending themselves against maverick companies and open source projects. We’ve been moving from the age of the blockbuster to the age of the indie. We’re increasingly seeing hundreds of small and mid-sized companies in industries historically dominated by just a few giants. The opportunities in this environment are dizzying.
Caterina is a personal hero of mine. She’s a born entrepreneur with great instincts. But she works for a big company that needs to hire hundreds of people per week. It’s not surprising she wants to discourage her fellow Yahooligans from running away and starting companies.