Rise of Startup Nation
There is a lot of fear and loathing in Investorville these days. You may have seen all the traffic regarding the cash crunch for startups as reported in the Wall Street Journal. Then the battle took to the Twitters as angels, super angels, ninja angels and VC’s spoke their minds on the current state of funding. Trouble is that it is a lot of noise.
This weekend I attended Boston Startup Weekend hosted by Boston University. I generally avoid these events, which tend to be more about networking and fun rather than anything productive. However, this weekend I was floored with the quality of the people, the energy in the room and the ideas presented. Many of the teams were able to produce actual product and even produce some credible customer validation. These were mere amateurs that could definitely give startup pros a run for their money.
What I saw this weekend and many others have been noticing for awhile is the dawning of startup nation. In fact, startup is a phenomena taking the globe by storm. Anyone with a dream and a decent Internet connection can build amazing web and mobile applications now whether it is Michigan, Mexico, Morocco, Malaysia or Mozambique. With tools provided by Boston Startup Weekend sponsors like Twilio, Cabana, DjangoZoom and others, the reality that one can build a real web or mobile application in a weekend is here. It is now more “plug and play” than heavy lifting, allowing more time on design, customer validation & acquisition, and monetization.
Even the business models emerging in the Internet space are becoming commonplace. Ecommerce and advertising were the first*, but now we are seeing daily deals, rentals, games, subcom and many other models take shape where the revenue potential and the process for developing the business are getting more standardized. We can easily see this with the rise of clones that have popped up all over the world. Every country seems to have its own version of Amazon, Facebook, Groupo, and AirBnB. When someone else has proven the model, there is little risk involved. The model is now a commodity and can now be franchised at will.
This commoditization however is a good thing for the ecosystem, as it improves the models and the concepts and popularizes the offerings. Having multiple players in the space provides a platform for the market to rapidly grow and jump the chasm from the realm of early adopters to the skeptical majority. However, because of the number of players and intensity of competition, very few will become breakout hits.
So what does this have to do with the current investor doom and gloom? Nothing, because the fact is that you, the entrepreneur, do not need them, the investors. This might seem ludicrous coming from an investor, but it is the truth. In an age when it takes next to nothing to build an app in blazingly fast time, what is the point of getting funding? Most of the startups today may secure funding, but will never get to a scale where they take a leading market position and get to a large enough exit to satisfy their investors. These startup survivors will exist with fewer customers and smaller revenues, but will still be profitable.
For entrepreneurs, it is important to understand the type of startup you are building. If the idea or technology is truly innovative, then it might be fundable as those startups generally get funding even in a downturn. If the idea is crowded and commoditized, then funding is either not going to be available or is going to be offered by second tier investors looking to flip startups. The best path is going to be growing the business using all the tools available to acquire customers and to do so in a way that can be monetized quickly without seeking outside funding. It will be the new class of startups that evolve into Internet small businesses that look and feel like startups, but are on a different, more slow and steady growth trajectory.
When I take stock of Boston Startup Weekend and the other startup events being hosted worldwide this weekend, I believe we are going to see an even greater explosion of startups launching. People are becoming comfortable in building technology from scratch and the tools to do so are getting easier and easier. The vast majority will never get funding, but some will succeed in a way that was not possible before without the need for investors. The possibilities are limitless; we are indeed in the midst of Startup Nation.
* OK, porn was really first, but not too many people brag about their breakaway Internet hits in that market…
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