Posted by
Benjamin on Monday, June 30th 2008
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I’ve been ‘doing’ startup technology businesses for over 20 years now. During that time lots of things have changed, and lots of things have stayed the same. It can get confusing as to which is which, so l took myself along to the SocialMedia Business School to catch up with current consensus thinking in the social media space.
SocialMedia Networks produced the event, which included panels with some familiar faces, including Joshua March. One of the highlights for me was Stefan Glaenzer, with his Fidelity Ventures hat on. Whilst he gave solid advice, in his usual straight talking style, it got me thinking about the place of VCs in the new open-source-social-media-powered technology world.
For the greatest part of my career, startups have depended on venture capitalists for a number of reasons, mostly contacts and cash for:
- Marketing, to get the company and product known.
- Development, to get the product or service developed.
- Funding the build out of a sales force ahead of revenues.
For a hardware business, there were high set up costs. Even for a software business, there was the cost of machines and development software, and funding a few years of development. But that has all changed. Hardware development has commoditized and can be outsourced. Computers are no longer expensive. Development environments are free and founder/developers are working for equity. For marketing, social media is enabling businesses to reach prospects (and customers) at a fraction of the tradition costs, and even close business too.
These days you can build a start up for five pounds and a crate of beer. Why five pounds and a crate of beer? Blame a conversation with Jof Arnold of
Brain Bakery for that one. We were talking about self-funded start ups, and developers working for equity, and surviving on minimal cash at the most recent MiniBar
meetup (see also:
MiniBar Meetup).
I think it was Jof who talked about someone surviving on 12 pounds. Well, I figured that you must be able to optimize that, given all the great lifehacking blogs, and survive on a fiver - especially if you had a crate of beer as an incentive for success.
Slightly more seriously, technology businesses are no longer anywhere near as capital intensive as they used to be -social media businesses even less so. Google, Amazon and others are providing hosted services (free for low volume) and development environments that allow applications to be developed and launched at low-to-no cost (in a Software as a service model). The same applies to knowledge-based businesses as well.
The key to getting a company up and going now is your core intellect and ability to motivate and organise yourself. You still need a clear, and suitably big, vision of what you want to achieve. Sweat equity is a good test of how good that sense of vision and that motivation is. 37 Signals pioneered the concept of
developing new products in spare hours.
This is a really exciting time for innovation and entrepreneurs. Whilst barriers still remain, many of the traditional barriers have come down. In the coming years there will be great change in company structures and across whole industries. That creates huge opportunity for those that can take advantage of it.
I’d forgotten about the beer bit - thanks for reminding me. I note you didn’t quote me on my slightly more extreme points - i.e. “if you NEED vc money, you’re doing something wrong”