With everyone providing their deadpool lists for Web 2.0 startups and imminent demise of startups it is more critical than ever that start-ups prepare to actually build businesses.You might think the end of the world is upon the startups.
The Sequoia Capital presentation to their portfolio about the effect of the downturn on startups, available capital, product development, shows a variety of potential impacts on startups and offers some strategies to mitigate the risks presented by the down turn. The goal is to relearn how to build successful early-stage high potential growth businesses. This includes learning how to:
- Perform situation analysis
- Adapt quickly
- Make cuts
- Become cash flow positive as soon as possible
- Spend every dollar as if it were your last
This isn’t rocket science. I love the focus on the financial side of the equation. Good business is about delivering return on investment to it’s shareholders. This has often been ignored by many entrepreneurs in the pursuit of attention. It’s about figuring out how to go from napkin to asking for the money. It’s starts with understanding the challenges that exist in a market place and offering a solution. Mark Evan’s has a great post, Buckle Down but Keep Innovating, on startups need to focus on business fundamentals and keep on innovating. He even provides example startups that have found an emerging business space. Outside of a few attention focused startups, I love that the list includes startups that are focused on solving problems that many marketing departments and digital agencies are experience in tracking conversations (Federated Media has unveiled social media measurement tools).
Business models might seem like a very difficult proposition. Peter Frisella has 2 great posts on the TechCapital blog about selecting a business model (Part 1 & Part 2). Much of the challenge with business models in the Web 2.0 economy is that it is not clear how they generate revenue.
Models that intrinsically generate revenue
- For these models it is clear how you generate revenue. For example, it is obvious that a manufacturer can make money by creating and selling an asset and as such this is the suggested model for a manufacturer.
- Models that do not intrinsically generate revenue
- For these models, revenue generation is not as straightforward. Instead a variety of “monetization” techniques must be employed in order to generate revenue from the traffic or value they create.
It’s about getting back to basics. At StartupEmpire, Rick Segal will be joining us to help run StartupSchool where attendees will see an idea go from napkin all the way through to funding ready startup. The goal is to have entrepreneurs in each session “who have real world, hard knocks experience that are signed up to share their stories, lessons and tools”.