@FOWA - Michael Arrington on Startups

These are my rough notes from the Future of Web Apps in London

What is the right formula is for creating a startup:

• Market Timing
• Key factors
• Areas of opportunity

Are we in Bubble 2.0?

• The difference between now and the bubble is that people are not taking companies public due to compliance and investors will not invest in unprofitable companies.
• $600m venture capital in "Web 2.0" in 2006.
• Facebook almost acquired by $1.62 billion.
• MySpace generating $25m per month in advertising.
• So we're just getting started. And we're seeing companies fail and close shop which is good since in the bubble they just got rolled into oher venture funds after three or four financing rounds.
• Things are just starting and the best internet applications are still to come.

What should you focus on when starting up

• Have a good idea! Better to solve a problem you have than to try to "research" market needs.
• Invent a market
• Destroy a market
• Remove Friction
• Have a business plan ( but Digg didn't have one!)
• Have a revenue model
• Build it cheap, test the waters - don't build a fully scalable solution until you know it is what people want.
• Avoid a high burn rate

But YouTube didn't do any of this!

• Threw away their original business plan and one founder bailed
• flaunted international copyright law
• Burnt through a lot of cash

So why did they succeed?

• they removed friction by providing a much needed services - IPTV (and not user generated video clips). People want to watch the Daily Show online and YouTube enabled that.

• first to market
• so much growth that money poured in to cover burn rate.

Shared attributes of Winners

• Founding team - passion for what they are doing
• Doing something extraordinary
• Removing serious friction
• Great founder dynamics
• Never raised big money or raised it late
• Create buzz

Losers

• Poor founder/team choices
• Lifestyle / Ego Entrepreneurs
• Raised too much money
• Spent too much money
• Over business plan
• Forget about scaling (when you need to scale)
• Have to try too hard at marketing - If buzz isn't happening, seriously rethink your product (not your marketing)

Case Studies:
Case Study : MyBlogLog
1. Launched Oct 19 2006
2. Acquired January 8 2007
3. Never raised a venture round

Case Study: Amie Street
1. Launched mid 2006
2. Two universtiy students
3. No capital raised
4. Can do to music industry what Digg did to news industry

Let artists upload songs and they can initially be downloaded for free. As more people download the price starts going up in cent increments upto 99c.

Case Study: Jingle Networks : 1800Free411
1. Free business information phone number
2. Has taken 3% of US market
3. Get revenue from placing ads before you get the number
4. Force AT&T to compete

Areas of opportunity

• Offline/Online
• Adobe Apollo platform : allows you to use application online and offline. One application to rule them all!
• Firefox 3.0
• File system + html/flash/ajax
• DRM and Music/Movies/TV - Market is waiting for a legal way to do this
• Data and service portability (teqlo, ning, pipes) - need to free users data
• Mobile Applications