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Saturday, July 09, 2011

Startup Enablers

1:02 PM Posted by Deepak Nayal No comments
Okay, neither am I the first guy to say this nor are you hearing it for the first time - this is an exciting and one of the best times to launch a startup. Not only has startup activity picked up in Silicon Valley, it has started to abuzz in other parts of US, Europe and Asia as well. The credit crisis has actually benefited startups. There has been an increase in talented people in the job market, and lots of employees have got disenchanted with their companies.
Though lots of startups have been established in various industries, there is no other industry that grabs as much attention and money as the technology sector. This is due to various reasons –
  1. Technology is a highly dynamic sector
  2. This industry is about creativity, innovation and user engagement
  3. It has great power to transform people’s lives
  4. It is a great equalizer. A small group of college dropouts, with a better product, can threaten the existence of an established brand
  5. And, most importantly, no other industry has and can create so much wealth in such little time as tech industry. Legendary Venture Capitalist John Doerr use to say, “Internet is the greatest legal creation of wealth in the history of the planet”. There is proof all around us supporting this statement: Google, Facebook, Twitter, Linkedin, Salesforce.com, Zynga, etc.
Launching a startup (especially tech based startup) has become much easier and cheaper overtime. Several changes in technological and business landscape in recent times have considerably lowered barriers to entry for technology-based startups. So much so that a guy sitting in his apartment can start a venture that can threaten a global brand. Some of these changes have been so fundamental that they can be considered as startup enablers that can help entrepreneurs start and scale new ventures much faster and cheaper. I have tried to identify these key enablers that can help startups, especially technology ones, a lot in terms of saving cost and time. In case I have missed other important ones please do share them in comments. I will be writing about each some of these enablers in more detail in future posts.
  • Cloud Computing – I do not think the world has thanked Amazon enough for what the company has done in the field of cloud computing. Its webservices and cloud computing stack have had a much greater impact on the world than its core ecommerce business.
    Currently, the cloud computing landscape is full of different kinds of players offering a large variety of services and platforms that companies can use to run their operations or entrepreneurs can use to launch their startups. Thanks to cloud computing, organizations can convert their IT capital expenses to operating expenses, and only pay for what they use. Cloud computing also enables companies to scale up quickly helping them to compete with bigger and more established players.
  • New Technology Platforms – I was a small child (and unaware of the world around me) when Apple, Microsoft and Netscape were busy launching operating systems and browsers - new technology platforms. It must have been exciting times then. I missed that buzz, but what is happening now is even bigger than that. Developments in social, local and mobile landscape are life altering and breathtaking – John Doerr has named this trend SoLoMo. Each of these trends are led by industry shaping platforms in their respective fields: Facebook, Twitter and Linkedin in social, Groupon, LivingSocial and FourSquare in local, and Apple and Google in mobile. Many companies and developers are leveraging these platforms for developing new applications and launching new companies. These platforms have not only led to founding of various startups in developed countries, but also have also unleashed startups in the developing world.
  • Easier Access to Funding – With so many venture capital firms and angel investors around (in US and UK), it has actually become more competitive for these investor firms to get good deals. Every investor is trying to find the next Google or Facebook. With barriers to entry lowered, entrepreneurs can launch technology startups with little or no help from investors for seed capital. This can increase their bargaining power while negotiating with angels and VCs. In addition to that, there is another phenomenon that is helping entrepreneurs raise money relatively easily – Crowdfunding. A variant of crowdsourcing (covered below), in crowdfunding, startups/organizations get money from general public, without sharing equity or raising debt. Kickstarter is the leader in this space.
  • Incubators – A lot of incubators have also sprung up which are not only helping startups with funding but also by providing them help with legal, infra, IT and other issues, along with mentoring the founders. A lot of startups now prefer reaching out to these incubators first, before dealing with large venture capitalists. Y Combinator is clearly the global leader here, and has become a brand of its own like Standford or Harvard. Seedcamp and StartupBootcamp are strong players in European landscape. In addition to these incubators, projects such as TechHub and Techmeetups have also come up which provide startups with space to work and network with mentors and other startups.
  • Crowdsourcing – Crowdsourcing is also one of best things that have happened to startups. Crowdsourcing is about outsourcing a task to a large group of people (instead of a particular organization), who take these tasks up voluntarily (for free) or in lieu of a fee. Wikipedia is probably the best example of crowdsourcing. Crowdsourcing has huge potential, as it leverages skills and ideas of thousands, if not millions, of people. A lot of companies have come up that solve different problems using crowdsourcing phenomenon: funding (Kickstarter and IndieGoGo), skills (oDesk and Freelancer), content (iStockPhoto), ideas (OpenIDEO), design (99designs), etc.
These enablers mentioned above have allowed entrepreneurs to start and run their ventures faster and cheaper. However, these enablers do not guarantee success of a startup. The same old rules of game still apply for making a startup successful. The ones that do not follow these rules, end-up as soon as they start-up.

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