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by tomkin
5158 days ago
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> Too many startups are focusing on areas that are over like 'Social'. See, I like to think of a startup as any other brick and mortar business. If it manages to leap into a world-wide success, nothing wrong with that - but don't expect it. Have a game plan that focuses on the reality around you. A startup isn't always a Facebook or Instagram (although they were too, at a point). It's okay to build an online business and just make $60-120 k/year - you know, like any other B&M business owner. To me a "startup" is simply described as a scaleable model that employs technology intelligently with modern-day principals of delegation, pivoting & management. I always get confused about exit strategy. To some it means here's what happens when/if I bail.... To others it seems to mean this is where I'll be a billionaire and.... Both are bunk to someone who is passionately building a product or service that they love. |
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The problem is that a lot of startups don't seem to have any plan in place to actually get to the point where they're actually making money on their own. The B&M store comparison is pretty apt here. You don't start a corner convenience store in the hopes that 7-Eleven will come up and buy you. You start the store because there isn't a store there, in the hope that enough people will come and buy stuff that you can make a profit.
That's where a lot of the worry is, I think. Especially because we're seeing a huge amount of VC funding going towards startups that are almost purely pinned on getting snapped up by a bigger company. Instagram is a great example of this. They have a product that has the majority of the current midshare in it's space, has millions of users, is a very cool application on both a technical usability level... and approximately $0 in incoming revenue. And no plan to make money besides "Maybe get advertisers on the platform at some point in the future"(http://behindcompanies.com/2012/04/instagrams-business-model... )[1]. From an investment perspective, it was a very bad investment... until they sold out to Facebook, at which point it was a GREAT one.
I think that's the concern that TFA has. A lot of startups, by and large, have turned into R&D for large corporations rather than traditional entrepreneurial businesses. The concern isn't that people are creating a product that's sold. They're creating a product without any concern about how to make money with it, and are hoping that someone with deep pockets will snap them up. There's a time and place for both, but the second shouldn't be getting nearly as much money as the first.
[1]To be fair, I think that with 30 million users, Instagram would have a viable business model based on advertising, and certainly could have made a profit. The problem, though, is that I don't think that model would return anywhere near the amount that the $500MM valuation indicated. Certainly, it would be in the low tens of millions of dollars, but not in the hundreds.