But the idea that anyone with a vague-but-sexy idea and a patsy to pick up the tab is an internet entrepreneur really grinds my gears.
Quadszilla has beaten me to the sucker punch with a finance primer for web startups:
Start with how you are going to profit and work from backwards from there. If you’re not spending less than you’re making, then you’re doing it wrong.
We agree on the symptoms, but disagree on the diagnosis.
The problem isn’t merely web startups not considering how to make money. The problem is some people still believe the basic rules of commerce don’t apply online.
If taxi companies ran like web 2.0 startups, drivers would:
- Offer free rides for three years (‘first mover advantage‘)
- Spend heavily despite rising gas prices
- Aim to repay their bank loans by selling up to General Motors
I’ve never run a taxi company, but that sounds like a high risk strategy.
A few years ago, I worked briefly for a small startup. The CEO’s experience intimidated me, until he told me he expected to sell the company to Google or Yellow Pages within six months.
Reader, I lost all faith in the man’s judgement in a heartbeat. This six-man strong company was turning over less than my then sideline (my fledgling affiliate business).
Here’s my ready reckoner: if your business model involves, er, doing no business, it’s really a hobby. Simple!
Many people have forgotten the lessons of the dot.com boom and bust. My advice? Read widely – start with Jason Calacanis on The Startup Depression – and be ready to capitalise on the stupidity of others.
In the words of Warren Buffet:
Be fearful when others are greedy and greedy when others are fearful.
There are dozens of decent books on the dot.com bust. Here are some of my favorites:
- Boo Hoo: A Dot.com Story from Concept to Catastrophe
- F’d Companies: Spectacular Dot-com Flameouts
- Burn Rate: How I Survived the Gold Rush Years on the Internet
- Karaoke Nation, Or, How I Spent a Year in Search of Glamour, Fulfillment, and a Million Dollars