With financial markets crashing and consumers keeping their wallets firmly shut, this year seems like the worst time ever to be starting a new venture. But whilst traditional businesses are grappling with the shortage of capital and a dearth of customers, online businesses with low establishment costs are successfully aggregating huge global audiences.
But even web based businesses need some fundamental attributes in place. A good supply chain, stable technology, a clever marketing plan and a sound business strategy. Most of all, you need to be solving a problem that really exists. All of these fundamentals can be achieved with very little capital investment, especially if you have a capable team who are prepared to contribute some time to the project in return for a stake. The days of inflated company valuations and leveraged buy-outs are over, replaced by a flight to quality. Door knocking around VC’s with your powerpoint show and business plan is a poor investment of your valuable time in this market. Look to your customers as the primary source of capital.
By adopting open source technologies and hosted services and by building communities of interest around the business, startups can bootstrap themselves to a point where they can prove that their business model works – and that’s a far more attractive proposition to a future investor. The size of the business is irrelevant to begin with. Small is beautiful in 2009 and the winning measures of success will be net revenue per employee plus the intangible gains from building social capital around your idea. Innovative web businesses will continue to find niches to occupy even as the masonry is cracking and falling off bigger, incumbent players in their death throes.
If you have a great idea for a web based venture in 2009 and would like some feedback on how to get started, drop me a line or post a reply below. Happy New Year.