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So apparently we've walked through the Foyer of Financial Fiasco and plunked ourselves down right in the centre of the Living Room of Economic Doom (settling into the Sofa of Slowdown, with our feet on a comfy bear market rug).
What's it like at your end? Are a lot of your budgets and projects that seemed like slam-dunks a few months ago suddenly coming under scrutiny? Or are you finding there's still room to experiment and innovate, even - or, with some particularly visionary organizations, especially - in a recession?
Start-ups should have a simple value proposition that is easy to understand. In a recession, that proposition should be "we save you money, NOW". Or maybe, a tad harder, "we bring you new revenue, NOW". With the emphasis on urgency. You can always save money by making sacrifices. But if you can save money by simply reducing a bill, without reducing the service, who would not do that? That is what Validas says they can do: "lower your wireless cell phone bill". You can cut your landline bills by using Skype, but don't you just love figuring out all the ways your cell phone company manages to increase your bill?
When the going gets tough, the tough get going. Times are now tougher. Which makes most people head home. The half-hearted entrepreneurs, the wannabes who thought it was going to be easy, the folks with connections to VCs who could get a $5m Series A for a copycat app. Who will be left? The gritty entrepreneur of the old school who knows that it is really, really tough to build a great company. At ReadWriteWeb we celebrate these gritty entrepreneurs and in a series kicking off today we will be writing about them - and for them.
This week I attended the Web 2.0 Expo New York, on behalf of ReadWriteWeb. Summing up 4 days of conference with all the amazing conversations is pretty hard. So before the conference, as I was walking to the Javits Center, I decided I wanted to come away with three things:
- One big negative impact of the market mayhem on the start-up world.
- One big positive impact of the market mayhem on the start-up world.
- One trend that seemed to be everywhere.
In other words, like Twitter and 37 Signals, I was deliberately reducing, cutting out, eliminating, restricting to ONE thing in each case. So here goes...
What a week of market mayhem! How odd having that as the backdrop to the Web 2.0 Expo in New York. We have been sounding alerts about the economic backdrop to our world of innovation for nearly a year. Back in February we wrote that this is not our bubble. Since then, the news from the economy has gotten worse and nobody is suggesting it will get better any time soon. Reading the papers is pretty grim (unless you stick to Sports or Arts). Yet we contend that it is not grim in the 'innovation economy'. Here's why...
"The Internet is recession proof," is a sentiment we've heard trumpeted over and over and over again the past year. However, guest author Llew Claasen argued on this blog in February that paid search ads specifically are actually not recession proof, and a new report out today appears to confirm that a broad economic slowdown in the United States is starting to negatively effect the online ad industry.
1. Businesses that can cut costs for clients can IPO in a recession. LinkedIn cuts the cost of business development, recruiting and finding experts.
2. The best businesses IPO when markets are down. It shows strength. Who cares if it takes 12 months for markets to pickup? Insiders will be locked-in for a while anyway.
3. Facebook cannot IPO. Their $15bn valuation won’t wash with public investors and they can hardly do a down round. So LinkedIn gets the mindshare and public currency to win the next round.
By Llew Claasen, a web technologist who runs his own consultancy, KeyJam.net.
It's nice being the industry leader. People start to forget that economic principles apply to you as much as anyone else. Say, you're an executive at Google and you have a conference call with analysts to announce lower-than-expected Q4 2007 results.
Why did no one ask whether the bulk of this drop was not attributable to lower-than-normal click-through rates (CTR) in a softening market?
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