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Friday, September 30, 2011

The Long Tail Of Startups

7:56 PM Posted by Deepak Nayal No comments
The startup activity has increased a lot in recent years. With many angels, VCs and incubators (such as, Y Combinator and Seedcamp) coming up, more startups are getting the support they require in the early stages. Even though many people generally call them investors, these entities [hopefully] provide more than just money - in the form of required capital, connections and mentoring. 

Tapping The Long Tail 
Even with increased activity in funding and supporting early stage startups, only small percentage of startups are able to get any help from such investors. Unfortunately, a lot of entrepreneurs miss on to the opportunity of getting the required support system for their companies. Media is also almost always generous only to the ones that are linked to some investor, preferably high profile ones. The blogosphere is full of news on such startups. However, there are many other ventures out there that are doing well, but are not lucky enough or do not have the right pedigree to get the required support system and the media attention.

Look around you, most of the SMEs that you deal with in your daily lives were not funded by any angel or VC or incubator in their early stages. These kind of ventures form the long tail of startups. The media does not cover them, we do not hear about them, and most of them die out, few turn into SMEs, and even fewer turn into sustainable companies. I do not have the data to support it but I can bet that the ratio of startups supported by VCs, angels or incubators to the overall number of startups founded in a year is very small. It can be argued that the success rate of the former group is higher than that of the latter, but possibly one of the key reasons that the second group - the long tail of startups - fails more is that they do not get the required help and mentoring. It is quite possible that this long tail will do much better with a proper support system in place; there definitely is a lot of potential in them.

Leveraging Technology
Technology is probably the greatest enabler of all time, and it can play this role for startups as well. It can help us democratize entrepreneurship, and open it up for more people. By its very nature, technology can reach out to anyone, anywhere and anytime, irrespective of their monetary status, education background or work experience. This trait of technology can help us open up opportunities for a lot of entrepreneurs that have not been able to get the attention of investors. There already are services available on the internet that help entrepreneurs with their startups in different ways, such as getting advice (Sprouter), getting funding (Kickstarter), finding investors (AngelList) and finding co-founders (Tech Co-Founder). At a closer look, you will notice that almost all of these services leverage crowdsourcing or [social] networking to provide their service. Services like these make me believe that we can combine the power of people with technology and tap into the potential of this long tail. 

We already are in early stages of doing so. Services, like the ones mentioned above, are available for helping new startups with a particular problem, though we still lack an online entity that acts similar to an angel or an incubator. If we can have open schools and universities, why can we not have open incubators? These virtual startup platforms can help entrepreneurs the same way actual incubators do, only remotely. They can take startups through various stages of funding, provide the required advice, connect with the required people (such as enthusiasts, technologists, marketeers and investors), and even provide platform to offer products and services and partner with other companies. We might have to make our peace with the fact that the success rate of such virtual platform is not going to be as high as premium incubators such as Y Combinator, but the actual numbers will surely be much higher. 

Technology has revolutionized almost every industry and function in the world. It has even revolutionized the act of starting up new ventures (with innovations such as cloud computing and services such as Sprouter and Kickstarter); though, much more is possible. The world of startups has a very long tail, which is mostly [and surprisingly] ignored. Tapping this long tail will not just help entrepreneurs and investors reap monetary benefits but also help the society in general.

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