Yes. I feel that’s true. No, I’m not talking about post-recessionary effects which many dub as the perfect scenario to build a great company. That’s true. But I’m not looking at it from a short-sell proposition but from a long entrenched business cycle which has been evolving from the past 30-40 years or so.
Although, I wasn’t there to see it myself but surely textual resources can help a lot to understand how it all happened or I should say how it’s happening.
But surely building a startup (let’s keep the taxonomy of startup to “only internet” ones) has become far more easier than it was a decade back or so; and by building a startup, I mean starting it up and making a grandeur exit, if possible.
Lets take couple of examples here:
These are top-of-my-mind recall of multi-million dollar deals that happened over the past few years.
So fact of the matter is those who are doing it are doing it faster, quicker and at a very young age. Infact, it’s quite common nowadays that a young entrepreneur builds a great company, accrues an awesome valuation and in some cases sells it at a premium.
This wasn’t the case earlier.
Perhaps a small personal story – my dad is a 1st generation entrepreneur who started off his small business (non-internet related) during 70’s. It took him nearly 15-20 years to achieve what many would say as a successful venture. On top of that, it took huge efforts starting from capital raising & deployment. But that was it – during that time, many would consider it be a victory of some sorts.
Now if that happens in today’s world, I wonder what would we make out of it. To be very specific, it was the late 90’s dot-com boom that catapulted many internet based business model then. But as we all know, what happened as we touched 21st century. Too many startups were chasing too little money in the market – and boom – we hit the floor. Actually as I see it, those were the days when the extra flab in the system were carved out to give a new direction.
Below is one of my today’s tweet wherein I pointed out the direction of modern day entrepreneurship. It genuinely reflects the barrier to market entry…
— Sampad Swain (@sampad) November 12, 2009
So the question is – were the guys from my dad’s era less intelligent or less hard working than folks of our generation? Sorry to present it dramatically but fact is this is not the case. In 20-30 years, I don’t think average human intelligence has changed so much or we are more hardworking than our fathers.
There’s something more intricate than outside reasons.
Talking about this topic, other day I read an interesting story which talks about the same too.
So coming back, the basic difference between entrepreneurs now & then is the amount of leverage available to a modern Internet entrepreneur is far, far greater than was available to entrepreneurs of previous generations. The number of entrants has dramatically increased as well. The overall hit rate might be lower, but the ones who win, win bigger and faster – thanks to the leverage.
For example, gone are the days of server farms, telesales and support, marcom material, tradeshow booths, direct sales forces, licensed software, mountains of code, reseller agreements, plane tickets, hotel rooms, printing CDs, voicemail systems, and so on and so forth.
Modern Internet entrepreneurship starts with a few engineers working for nothing and carrying latops and cellphones. They coordinate with Skype and GTalk and wikis and bug tracking sytems. The company itself is snapped together with outsourced HR, cookie-cutter incorporation, and outsourced finance / payroll. Marketing is done virally, or through SEO, or SEM. Customer service is handled via the community and forums. PR and outreach through tweets and blogging. Payments come via Paypal. Ads are served up by third-party ad networks. Storage goes on Amazon. Computation scales via Amazon, Softlayer or Rackspace. Code is built upon stacks of open source, SaaS, and $10/month services.
What used to cost $1M-$2M to set up, now costs $10K or even less in Indian scenario. What used to cost $5M to build, now costs $250K. What used to cost $20M to go to market now costs $1M.
So true! Isn’t it?
Also if we talk about the market size in terms of internet population, it has been considerably moving northwards. Every year or even every quarter millions are people are added online. Infact, the stats says that more than 3 billion people are online now out of about 6 billion earthlings. They all want to use products and spread it if its good. But we have to build products which meets a specific need or cater to a genuine problem. Then there’s network effects which has been growing stronger day-by-day. With time, labour costs are reduced. Skill sets are become a commodity. That means less capital required. Less cost to scale. More so, most web products have near about zero marginal cost of replication; adding a new customer is pure-play profit which makes it easy on marketing & shipping costs.
So every day or so, we hear stories about another Google, Yahoo, Ebay, Amazon coming up since leverage is the name of the game now. Anybody who has some solid product to a solid game-changing problem, then that’s a hit.
So if “NOW” is not the best time to startup something, then I don’t know what will?