Shanti’s Dispatches

I guess this post was making the rounds this week while I was busy coding up a storm. Ironically, I was implementing a billing system so that we can charge cards at Sprout.

Hello. It’s never a good time to start a company without the intent of making money.

You don’t have to make a lot to begin with… Overture started by making pennies (literally) and went on to be acquired by Yahoo for $1.63 billion.

Evaluating Business Ideas

Whenever someone tells me about a new business idea, the first thing I ask about is the business model.

Here are some simple business models

- Buy widgets at $2, sell them for $4. (Wal-Mart)
- Offer a free, limited service to attract clients. Also offer a premium service and charge for it. (Sprout, 37 Signals)
- Blog about interesting things, sell advertising. (Weblogs Inc.)

It doesn’t take a rocket scientist to do some back of the envelope calculations to figure out how much dough you can potentially make with your business model.

If the model gets much more complicated than any of the above… I’m usually a little skeptical about its potential viability.

When to realize you’re in a Web 2.0 circle … you know what

99% of the population has never even heard of Web 2.0. Even in the tech industry in non SF Bay Area cities. (you’d be surprised)

These people:
- don’t have a gmail account, nor do they even know it exists (they are still using some crappy hotmail 2mb limit acct they opened 4 years ago)
- don’t read blogs
- especially don’t read TechCrunch (let alone know what it is)
- have never heard of Ruby on Rails
- Ajax? are you kidding? they think it’s a cleaning detergent

I’m not a part of the whole SF Bay Area thing (yet), but we do need to keep some perspective here… Pets.com isn’t going public again like it’s 1998. A few lucky (+ highly-skilled & passionate) guys in their garage got bought out for $15-30 mil. The rest of us have to actually bring in the Benjamins, with uhh, you know, paying customers n stuff.

Me-too companies… What’s the bfd?

Commenters on the Caterina post belittle all the ‘me-too’ companies coming out of the gates. I don’t really know what ‘me-too’ means exactly… Yes, there are some ‘me-too’ companies, but that’s really just a sign of competition and innovation.

The weaker ones will be weeded out, though, when hosting only costs $10 a month, what’s the bfd? Throw some AdSense on there and you’re all set.

Of course, if you’ve taken $5M in VC and your business model is “throw some AdSense on there,” well, you better have a lot of targetted content + traffic. They only make so many Yahoo/Google acquisition lottery tickets.

You can bookmark this, digg this or check the cosmos