Changing business paradigms

It is old news that the internet is shifting the ground under our feet, but here are a few thoughts about what the implications are, ultimately, for startups.

1) As reputation capital and social network sites get better…

…the world is becoming smaller. Information is better accessed, faster and generally for free. Looking to hire a team? post it on Facebook, stalk people in Linkedin and check their authority on PeerIndex.

2) Ever expanding access to credit and investment.
Just think of Kickstarter, crowd investment, grant access, government funded incubators, startup accelerators (like Seedcamp, 500startups, Y Combinator, Techstars, StartupSauna…), social enterprise funds like Acumen, Angel funding and even online instant loans.

But even as this gets better, startups need less and less because…

3) Don’t forget the deflationary power of the internet!

Startups have access to incredibly mature open source technology (think Google suite), incredibly large distribution channels (think fb / twitter and App stores) and incredibly scalable infrastructure (think Amazon web services). And they have access to these at nominal cost.

When i started Stitch Alpaca i registered at the Companies House online in ten minutes for £20, interviewed designers face to face over Skype, collaborated on press releases using Dropbox and Goggle Docs, sent countless emails and attachements, created the graphics on GIMP, made a Facebook page for my company and spread it to friends, who spread it to theirs, until one of those friends worked at a national broadsheet and contacted me for an interview, which was read by thousands of people – for free. I built a website using freeware, hosted it for £4 a year with 2gb of server space, and used $10/month SaaS to host my web store, take care of inventory and payment processing. If i wanted i could even use to automatically email my suppliers for new stock when it was running low.

Total cost of running the company: about £10 a month.

So what does this all mean?

You have declining launch costs, defined ecosystems emerging all over the world facilitating inter-personal spread of knowledge about an army of the best services, mostly online and mostly free, which are there to help you gain exposure, build a team, get money, build a product, iterate based on real-time feedback and validate business models as fast as possible.Web communication allows you to work with anyone in the world, or anywhere you like. At the same time the internet will continue to spread and reach increasing amounts of people, growing your market, user base and talent pool all at once at zero effort or cost to you.

There has been no better time to be a tech entrepreneur, except that there’s never been so much competition, though that’s only bad news for you – if you want to succeed you’d better be damn good. Especially because more competition means more companies, which means more teams – which means a more dilute talent pool. On this subject Google’s efforts have been really interesting: they’ve been buying up promising startups for their brilliant teams rather for the product they were building. The commoditisation of skilled teams is something i think we will hear about much more in the future – increasingly, it’s where the value’s at.

Ultimately the result of all this is democratisation.  Which in turn implies the marginalisation of the traditional background. It won’t matter how big your offline rolodex is, what university you went to, where you live, or whether your family can lend you £100k. Sure it’ll help, but already it doesn’t matter like it used to.

What will matter is you ability to do one of two things: make something useful, or sell it.

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