I’ve been at Zinch since summer of 06. Two years and change later we have about a half million students, 600+ four-year universities, thousands of lines of code and a nice product to show for it. It’s been a lot of work, to say the least. And this is just the beginning.
With the recent financial meltdown and economic crisis, i’ve been thinking alot about web businesses and their future. I see friends and friends of friends starting or looking to start web businesses. College campuses are becoming breeding grounds (more than ever) for web entrepreneurs. I read about dozens of new web businesses every single day through blogs like Techcrunch, Mashable and KillerStartups. New websites are everywhere. Everywhere.
And why not start a web-based company. It’s inexpensive (relatively speaking) and it’s sexy (you know it is).
However, there are two fundamental problems that I see right now.
1) People don’t realize how effin hard it is to create something that people care about.
2) Too many web businesses are coming out with NO business model.
Because everyone and anyone is doing it, people get this hugely misunderstood notion that starting up a SUCCESSFUL web business is easy. No. It’s not. Just cuz you rocked door-to-door summer sales for the local Pest Control company or you took some e-business class last semester or you’re girlfriend thinks you’re hot doesn’t mean it’s gonna be easy. You are way off. More and more websites are competing for our time and it’s becoming tougher to create something that really matters.
When I meet with web entrepreneurs (be it phone, lunch, email, etc), I pump them up…I encourage…I smile…I excite….I inspire. But deep down inside I’m thinking of what all this really means. It means all-nighters. It means going months on end without salary (at times) and trying to figure out how you’re gonna pay the bills or what you’re gonna eat for dinner that night (if you’re gonna eat at all). It means failing, failing, failing, failing on small battles, strategies or plans. Everyonce in awhile you’ll find a win…and you’ll sleep so well that night. Overall, you’ll lose more battes than you’ll win. That’s reality. But that doesn’t mean you can’t come out on top overall. But it’ll be discouraging. It’ll be draining. Passion is the only thing that’ll lift you up and get you out of bed in the morning to fight that next day’s battles. It’s the only thing.
I meet with these entrepreneurs and I try my best to articulate this. I try my best to convey this. It’s hard to communicate. I don’t wanna pop any balloons or burst any bubbles. I want them to live the dream. But sometimes it hurts inside me…cuz I know that so many aren’t willing to pay the price to succeed. They just aren’t passionate about it enough…they aren’t mentally tough enough…..they aren’t competitve enough…they just aren’t enough. Starting something up on the web is easy. Making it successful is almost impossible. Relatively few actually have what it takes to slip into that small percentage.
The other big problem is stinky business models.
Advertising dollars are going away cuz of the economy. And ad-based business models are proving to be bad ideas. CPMs are way down on social networks (or anything even remotely social) and people just aren’t clicking on ads anymore. Even Facebook is “struggling” to become profitable.
A common train of thought nowadays is that you just need to gain critical mass now, and worry about the business model later (or be acquired before you even have to worry about it). I personally don’t have a huge problem with this if you can succeed at part 1 of that plan: gaining huge critical mass. If you have that many users in one place and that much traction…you’ll always be fundable and you’ll always be able to buy enough time to ‘figure things out.’ Twitter is a perfect example of this. They’re growing quickly yet they still haven’t figured out how to make money. I DO believe Twitter will figure things out (if they aren’t acquired before that) and will eventually have a huge exit.
The big problem is when you DON’T achieve critical mass. You bet the ranch on that and it doesn’t happen. You put no thought into the business model early on and you are stuck with a business that’s not really a business cuz you aren’t making money. No money. No traction (or critical mass). You are screwed.
To me, it seems like so many websites right now are falling into this category. They see all these other sites (twitter, digg, facebook, youtube, etc) gaining huge critical mass and it almost seems easy. They read about these companies in the headlines; Scoble and Calacanis won’t stop talking about them; all stories on Techmeme worship them. So the big bet people make is to be just like them. Critical mass now and business model later…all the while saying ‘everyone will wanna advertse to this demographic’ as the fallback plan. Of course, the ‘critical mass’ plan fails (cuz youtube and facebook are the rare exception) and you are in a tough situation.
In fact, if you ain’t VC backed (sitting on a couple Mil) and you aren’t making the cash register ring, you are in deep doo doo. You’re oxygen is running out. You’re gonna have a hard time raising any money (unless you have some SERIOUS traction) in this economic environment and you start to stare at death in the eye. Inevitably, you eventually go into hibernation mode (fire everyone except you and your cofounder…which you’re praying knows how to code) and essentially grease yourselves up to hop into the deadpool (development moves like a snail and you go get a job at BestBuy).
Lucky for VC-backed companies, they have a little more time to get the biz model figured out (and/or the value proposition >> which leads to critical mass >> which leads to more investment >> which leads to more time to figure out the biz model). But that’s the only difference. Time. More time. But I digress…
I think so many of the web-based companies coming out right now are in trouble. I really do. If the business model isn’t solid (which so few seem), and the value proposition isn’t HUGE (HUGE HUGE HUGE…not just, eh, okay)….you ain’t gonna last. Both of those factors are near impossible to figure out and the economic times sure aren’t helping.
If I ever become an angel investor (which someday I’d love to), i’m gonna be bad (or maybe good). I’m gonna wanna invest in basically no one. Bruised and battered along the way, I know how hard this is. I know how hard it is to grow a web business. And I know how hard it is to make something that matters. I think there are few people who will scratch, scrape and bust butt to profitability….and I think there are even fewer who have the insight, ingenuity and perseverance to create something that people care about.
Are you one of the few? Are you a wantrepreneur or an entrepreneur? You’ll never know unless you try.
This post was way too long. If you got this far then you are awesome.