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Information Wants To Be Free

Published: 2/27/2008 10:06:16 AM, comments: 0

There's an interesting debate about the prevalence of "free" services on the Internet, especially for those businesses where the marginal cost of delivering the next item is close to zero.

Although it is a complex topic, my take on it is that for those online businesses that are principally aimed at communications, such as social networks, free is an idea that works pretty well.

The reason is that networks that can grow through word of mouth and gain rapid adoption can then monetize those page views through advertisements - at least enough to support the capital structure of the company.

Other online businesses that can't scale quickly, and thus require greater investment in longer term marketing, simply won't be able to offer their services for free and survive. 

I foresee a period in the coming years where various types of online businesses will discover which can be supported by third parties, i.e. advertisers, and which cannot.

Don Jones

VentureDeal

What To Do In A Recession

Published: 2/20/2008 10:41:00 AM, comments: 0

It looks like the US is entering a recession.  What do you do if you run a startup? 

First, don't panic or make any rash decisions.  If you are still in pre-revenue development stage, the recession may not affect you much, since you aren't yet selling your product or service. 

If you are in ramp up, your response may depend directly on your financial resources.  Those companies with extensive resources may wish to continue at full speed ramp in order to grab more market share during the downturn.  However, those companies with limited resources may need to make tougher choices.

Those tough choices can include laying off the poorest performers or non-essential hires and/or consultants.  Cutting other costs wherever possible without cutting out muscle may also be necessary.

Although there is no way to predict the length and severity of a recession, recent history - the last 20 years - has shown that recessions are shorter and less severe than before, primarily due to faster acting monetary and fiscal policies that minimize disruption.

The key takeaway is to not overreact and cause more disruption to your fledgling business than is warranted.

Don Jones

VentureDeal

Mistakes New Entrepreneurs Make

Published: 2/13/2008 12:12:16 PM, comments: 0

This post is the beginning of a series of topics related to the mistakes that I've seen new entrepreneurs make in starting and operating their technology companies.

One mistake relates to their funding search.  Granted, the funding search is usually a difficult and hard to understand process.  Entrepreneurs make the mistake of approaching potential investors in a serial manner, rather than parallel.

You should try to obtain a significant "universe" of VC firms or angels and create a spreadsheet or other way of tracking your progress, and decide to approach a number of them at once.  Finding funding is sometimes a numbers game - you just have to go through enough investors to get to the ones that "get" your product or service.

I'm not advocating a "buckshot" approach where you simply contact all potential investors at one time.  I would suggest that you start off with 3 to 4 targets and get a few presentations under your belt.  You will also hopefully get some feedback on your presentation and company concept that you can then use to improve your future presentations.  At that point, go out to one third of your target investors in the next traunch.  Rinse and repeat from there.

Approaching investors one by one is a recipe for losing momentum and putting your startup at risk.

Don Jones

VentureDeal

Sources of Funding Other Than Venture Capital

Published: 2/6/2008 2:23:12 PM, comments: 1

We recently came across an article providing all kinds of alternative sources for entrepreneurs funding your startup.

Some of the sources are more practical than others, but all of them provide you with food for thought:

101 Unconventional Sources for Entrepreneurial Funding

Cheers,

Don Jones

VentureDeal

Don Jones
CEO, VentureDeal

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