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.
I read this entire post and tried to pretend you were right here saying it to me, and me only. Thanks for putting this together, just what I needed to read today.
Mick, that was probably the BEST post I’ve read in a LONG time.. Great insight and REALITY
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.
You know what’s scary? This was as true in 1999-2000 as it is now.
Of course, there’s now an entire cadre of twentysomethings who look at us who were in the dotcoms as if we were part of some ancient history.
The lesson I learned from my time in the dotcoms is that good ideas always become good businesses, but there are a lot of bad businesses with good ideas. Your goal is to be that good business with that good idea.
And also, do it before you’re 30/married/have kids. 80 hour weeks are not family-friendly. After 30, you can be the venerable dotcom veteran brought in to give the startup “maturity.” :)
Mick, thanks for the post. Also one of the BEST posts I’ve read for a long time…classic. Thanks for keeping it real. Inspiring and exactly what I needed.
Amen.
Rolling an online business model into profitability is effing hard, expecially the kind of profitability that will provide a decent exit.
Alas, most people online don’t shoot for the exits, VCs, or angels. So many people shoot for the small time $3k a month type wrung at home type business, without a model or a plan, from the hip… and they end up not being able to afford their own hosting.
The economy’s going to hammer web businesses up and down the scales. But I think more and more people are going to jump in seeing how the barrier to entry is so weak.
…and I’m still thinking about this… great post.
There’s just a massive illusion out there about the ‘easiness’ of online business. It’s almost being portrayed as a ‘get rich easy and relatively quick’ industry. The economy is lame sauce and more and more people are recognizing that they CAN have a business online if the want to and that it could possibly pull their financial ship along during hard times.
There are so many internet marketing and social media pundits out there that spend their brain cells crafting ways to create an illusion of easiness in order to stage a feeding frenzy so that they can pitch their own business models to the frenzied feeders. I see it all the time. In turn, thousands of people join the internet marketing fray with unmeetable expectations.
Shoot, if Twitter and Squidoo and Hubpages and Digg and StumbleUpon, and Weebly can do it and Mr. Mark Zuckerburg college drop out, what the heck, I can too.. mmm, not so much.
You’re so right. Effin hard. What the normal person doesn’t realize is that most of the largest sites in the world, Myspace, YouTube, Facebook, and even the larger blogs like BoingBoing, Mashable, Smashing, HuffingtonPost, LifeHacker are struggling to pull a sexy profit, some to even profit at all (the tech blogs clean house though). But because of their traction and their critical mass, they still have huge value and can prove that value on paper. That won’t be true for 99.9999999% of everyone else. We’re fighting uphill, some just barking up hill at something they don’t even understand.
Keep the good stuff coming. And BTW I freaking love your blog design dude. I’ve seen a bazillion blogs and your Wall has got to be one of my favoritest features I have ever beheld.