Don’t paint with a broad brush in this downturn
We are still in an marco economic mess.
I’m not going to pretend to predict when we will get out of it.
But there is something very familiar about this down turn as the last downturn.
There are some folks (VCs, press, bloggers, entrepreneurs, bystanders, critics) that have decided to paint with a broad brush.
That happened in the Web 1.0 crash.
In those days, some people said generically:
1. Too much money chasing too few deals. And they got out of this startup ecosystem business. Thankfully many stayed in the game or jumped in.
2. Startups can’t succeed in the consumer electronics space. Thankfully Sling & Flip didn’t listen.
3. Ecommerce is dead. Thankfully, Netflix, Amazon, Zappos and others didn’t mind those naysayers.
4. Free is dead. Thankfully TripAdvisor, Skype, MySpace, Facebook, Google and many many many others ignored them.
5. Open source is dead. Thankfully MySql, RedHat, jboss and many others ignored them.
And now in downturn 2.0 we are hearing many people make grand statements about big markets, like:
1. Online video is dead
2. Social networks can’t make money
3. Where is the business model in open source
4. Venture is dead
5. I’m only investing in things with “proven” business models.
6. Free doesn’t work.
7. There isn’t a business model with online music.
Sound familiar?
Look, here’s the thing. There are plenty of bad ideas out there and mistakes are being made. At the same time there are people inventing stuff and executing like crazy. There are people innovating in almost every category and inventing new ones along the way.
I’m an optimist. I believe you can’t be an optimist only in good times.
Build a great company in any category you want.
Amen!
Now is a great time to give any good business ideas you have a try, provided that it’s an idea you can bootstrap (or start with scarce resources). If your business can be built now and start to generate revenue, then there’s real scope for growth when the market starts to climb again and buyer confidence returns.
When I went to the Business Startup Conference, one of the speakers said something that stuck with me - go to a bank, pitch them your idea and ask for a loan. If they say no, it’s probably a bad idea.
This economic climate is good because it makes business news more interesting. Only the truly bright ideas which can turn a profit without comically large investment, money that’s rare, appear on the radar.
Point 6, about “free is dead” - Google get 97% of their revenue from advertising on their search and the free products they provide like Google Mail. There’s a genius business model that beats free hands down called “freemium”, which has been my favourite business term since my bachelors degree. You give a part of your product or service away for free, get the market interested in it, and then have extensions that you charge a premium for.
UPDATE: There’s a really great article here from Dov Seidman on Business Week. He hopes that the recession ends soon, but that we recover slowly and learn what went wrong in the process. Business leaders need to learn more about “spending, saving, borrowing, regulating, [and] reading the fine print in an investment prospectus”. Worth a read.
