This is a guest post by Christopher Pyper Co-founder and Lead Developer of MyWebVine.
When I finished school and first hit the job market it was right in the middle of the dot-com bust. When I finally found a job it was at a company called Hostopia. The company sold web hosting, email, and application services for businesses through large ISPs and Telcos like Rogers, Bell, Telus, and Verizon. Working there was a very intense learning experience for me. The rapid growth meant I had to learn fast, work even faster, innovate always, and adopt as quickly as possible.
Hostopia was almost entirely bootstrapped by it’s owners – who worked there every single day. It had a solid business model and an awesome core team of employees with whom the founders had worked with in the past (they had previously founded Tucows and Look Communications). Just a few months ago Hostopia was acquired for $124 million, not too shabby for a Canadian tech startup. There is undoubtedly something to learn from a team that can produce three successful Canadian start-ups in a row.
This company succeeded when everyone else was failing during the dot-com bust by having solid fundamentals. Have no doubt that we as Canadians and Entrepreneurs will be hit with the repercussions of this credit crisis. Getting the basics right is even more important now that financial meltdown has tightened a lot of purse strings.
BUSINESS MODEL
Does the world really need another Twitter clone? Is your Facebook application going to stand out from Vampire Bites? Why in hell are you gambling on an acquisition to profit? Are you actually going to make money? If not, go do this right now: Climb to the top of the CN tower – or take the elevator – and look around, you will see businesses and consumers in every direction stretching to the horizon. The world is a big place and there is still plenty of room for good ideas.
Most of the successful web based start-ups I have seen were great because they brought something to the web that was never there before. And they had a way of drawing profits now or in the near future from sales or advertising. In other words, they made money directly from their service. Hostopia resold it services through large ISPs and Telcos. They didn’t give away free accounts, cheapen themselves by fighting for the bottom, or over-hype their products. They simply sold a good reliable service for money.
FUNDING
Too many start-ups burn through too much cash with no tangible results. The fact is, many web-based start-ups actually need very little funding; at least to build their service. Whatever happened to a little sweat equity and bootstrapping? A distributed team can get a lot done collaborating through voip, email, im, and wikis; all while managing source code through tools like Git or CVS. As for hosting costs, those can be easily be kept down in early stages by using a reliable shared hosting service, or a cloud service like Amazon EC2 or Google App Engine. If you do require funding, at least try and develop something tangible to bring to the table. This shows you have enthusiasm, proves your concept, and demonstrates you can deliver – it also greatly increases your chances of securing the sought after financing.
TEAM
You need a great team if you really want to succeed. This goes for every department, not just technology. Your lawyer, accountant, marketing director, and sales people are just as important. Hostopia’s founders have been using the same core team through three successful start-ups (going on four now I think), that’s how important they are. I have seen first hand what a small powerful team can do.
Make sure your team members have the four E’s: Education, Experience, Enthusiasm, and Equity (tangible direct equity in your start-up); otherwise, your just spinning your wheels. Bringing on employees that don’t have the same enthusiasm as the founders is the surest way to fail, the company is just a paycheque to them.
Don’t forget, recessions can mean opportunity for your start-up, if you have nailed down the fundamentals.
Great post Jevon. A downturn like this can be very scary if you are in a position where you are running fat (even a little) and not 100% sure that your business model and product are on the right track. To Jevon’s point most BIG successes and companies that accelerated rather than decelerated (or disappeared) during turbulent times were continuous vs discontinuous innovations.
If you are not sure where you are and feel like there are questions at all about your business fundamentals it is probably time to pull back and try to refine and weather the economic storm. If you are where you need to be then be cautious with your cash but press on as this can be a great time to distance yourself from competitors and become a leader in your space.
Validation of whether you’ve got it nailed with associates, advisory boards, etc is a must do exercice to avoid navel gazing.
Great post Jevon. A downturn like this can be very scary if you are in a position where you are running fat (even a little) and not 100% sure that your business model and product are on the right track. To Jevon's point most BIG successes and companies that accelerated rather than decelerated (or disappeared) during turbulent times were continuous vs discontinuous innovations.
If you are not sure where you are and feel like there are questions at all about your business fundamentals it is probably time to pull back and try to refine and weather the economic storm. If you are where you need to be then be cautious with your cash but press on as this can be a great time to distance yourself from competitors and become a leader in your space.
Validation of whether you've got it nailed with associates, advisory boards, etc is a must do exercice to avoid navel gazing.
That’s a fantastic post. This recession is spurring on some thought provoking and timely posts around the blogosphere. I hope that anyone in a startup is taking it all in. It’s a good time for all startups do to some major housecleaning.
That's a fantastic post. This recession is spurring on some thought provoking and timely posts around the blogosphere. I hope that anyone in a startup is taking it all in. It's a good time for all startups do to some major housecleaning.