I don’t…

I don’t have a rich Father

I wasn’t left a sum of money from my Grandma

I didn’t go to Harvard

I don’t live in Silicon valley

I wasn’t funded at Techcrunch 50 or Y combinator

I’m not technical genius

I can’t code the latest killer app

I guess I’ll just have to build my startup the old fashioned way. Work my ass off, invent my own revenue, build a team and improve what I have to offer as I learn from the mistakes I’m bound to make. If you’re still around in 10 years, look me up.

Retail startups are rad

This guest post by Michael Fox. Michael is a co-founder of the design your own women’s shoe business Shoes of Prey. He blogs about the adventures of running a startup at www.22michaels.com.

5 reasons why retail startups are rad

Prior to starting Shoes of Prey, Mike Knapp and I were working at Google and were brainstorming industries that would be good for an online startup. We settled for online retail and here are the 5 reasons why:

1. There is so much room for innovation
Retail is an industry that’s 1000′s of years old and while there have been innovations, there hasn’t been an enormous industry changing event in that time. Online retail has the potential to change the industry more than anything else in it’s history.

Whether it’s offering products in a way that has never been possible before, like Pandora do with music, the brilliant use of customer and sales data at Amazon to suggest highly relevant products to customers, a new retail model like offering only 1 product (Woot) or deal (Groupon) per day, or tearing up old business models as Alice is attempting to do with grocery and Apple did with music retailing, online retail has enormous potential for innovation and there are so many ideas out there waiting to be executed.

2. Online retail is a growing industry
Figures can vary depending on exactly what is classified as ‘retail’, however online retail still makes up only a small percentage of total retail sales, in the order of 5%-6% in the US and less in countries like Australia. This is only going to grow.

3. An online retail business is easy to monetise
In addition to the difficulty of getting people to use your product, many online startups face the problem of how to make money from their business. Take Twitter and FourSquare. They’ve each built a fantastic user base, but they now face the challenge of working out how to make money from their product.

Like countless retail businesses for 1000′s of years, an online retail business sells a physical product so there is no need to develop a whole new business model for the business to be profitable.

4. There’s not a great deal of competition
The lure of getting rich quick by hitting on a winner in Apple’s Appstore or building the next Google or Facebook draws most top developers into those spaces resulting in a huge amount of competition. Most good web developers, when brainstorming what sort of business they want to start will avoid anything that involves a physical product like the plague.

If you and your team have the skill set to build a great website, and manage physical operations like sourcing physical goods and a physical supply chain, then you’ll face a lot less competition in the online retail space.

Of course you’ll potentially face some competition from traditional retailers moving into the online space, but particularly in Australia, that’s happening at a very slow pace. To help minimise that risk, but an innovative spin on your product and odds are you’ll stay well ahead of most traditional retailers.

5. The industry is small enough that you can have an impact early on
Online retail, particularly in Australia, is only just starting to develop. There are a number of industry groups and websites that have only recently started like Internet Retailing, Inside Retailing and Power Retail. Because these sites are relatively new it’s not too difficult to get coverage from them. It’s a similar story with conferences and industry awards. If you do something new and interesting in the online retail space you’ll soon be presenting at conferences and find your startup a finalist amongst some fantastic industry players.

If you’re thinking of doing an online startup I’d recommend considering online retail or applying a similar thought process to the industry you’re thinking of launching in.

Click here to follow Michael on twitter.

Time to share your thoughts:

If you run a startup, I’d love to hear about the factors that influenced you to choose the industry you operate in?

Unsynergy

Guest Post from Mick Liubinskas from Pollenizer.

—————————————————————–

Department of Startups – Community Announcement

Unsynergy – where the whole is less than the sum of the parts. Often caused through too many features aimed at too many people with too much information.

86.3% of startups are injured or killed each day due to Unsynergy. Please help us stamp it out once and for all.

The worse thing about Unsynergy is that the person who is inflicted with it is unable to see the symptoms. They keep adding more things to their startup – more features, more content, more options – whilst they are slowly (or often quickly) committing suicide.

Most people on the outside, looking in (e.g. customers) can see Unsynergy for what it is. Though sadly, they rarely care enough to let the founders know. (Or can’t find the feedback button amongst the 100 other options.)

Founders, please understand, more is less. Less is more. Less is great.

To bastardise a great quote, “Great products are finished not when there is nothing more to add, but when there is nothing more to remove.”

Fight Unsynergy, Remove a Feature Today!

Thanks, Mick Liubinskas.

pollenizer.com
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The truth about digital offshoring

BRIC nations (Brazil, Russia, India and China) are the buzz word in business for good reason. In the good news for us small entrepreneurs is that access is no longer limited big players. The internet has made it possible to have a global work force from launch date, and the same cost advantages that multinationals have had since they started exporting labour to China and other parts of Asia since the 1960’s. Anyone can do it now.

Before you worry about the ethics of ‘off shoring’ there’s some stuff we should know. Exporting labour overseas is ethically sound. It is beneficial both to the recipients and the providers of such work (us). The average computer programmer earns around $1000 a month in India. In the USA and Australia it’s more like $7000 a month. Unethical? Not really. The $1000 a month versus the average in India of $85 gives new information workers in India and very high standard of living.

When we inject money into developing economies we are increasing the living standards not just for our employees, but for their economy in general. In addition we have the option to pay them above market rates to create strong loyalty. We have the option  treat our people well and create important cultural exchanges and relationships.

Other peoples time is what we must leverage for startup success. A simple business fact time immemorial. Only now we have both currency advantage and access. The issue of moving jobs overseas is a crock. We live in a global age, an internet economy. We all buy goods everyday from overseas. Geographical barriers simply wont exist shortly. So we should just get on board. Protectionist attitudes are outdated. No one is sending kids down mines with digital offshoring. If local people are getting put out of jobs, then they’ve been earning too much for what they’ve been doing anyway. Their outplacement is inevitable.

Startup Blog says:

• Outsourcing is available to everyone, not just powerful companies

• Off shoring improves living standards

• Off shoring is ethical and important culturally

• We must embrace it, or get left behind. There is no choice.

Startups and Standups

Listening to an interview with Jerry Seinfeld he said something which sounded like good advice for Startup Entrepreneurs.

Here is what he said verbatim:

“Your write and you write, and you don’t know if it is any good. You have to get up in front of an audience to find out if this is any good. You always have to try things, and the audience kind of writes the act for you in a way. They say, keep this, get rid of that. And you use them as a judge. They are the judge.”

It seems success in most enterprising professions are about being guided by your audience or customers. Testing, refining and constantly iterating.

Startup blog says: Real market feedback, is the only way to test any written plan. It beats research every time.

Building your personal brand

One of the sections at Startup School is building personal brands. Which are of increasing importance in the entrepreneurial sphere. Once upon a time our business reputation built a personal brand. Recently things have flipped somewhat where our personal brands are used to build our business ones. Jay Z style… It just so happens that it works on a micro level as well.

Build a personal reputation, as a smart, caring,  and giving person in this new business context (or have some hit song and Hip Hop wars) and you’ll be on the way to building an external financial brand.

So here’s some nuggets from Startup School to get excited about:

Web Business Valuation 101

A great spoof by the crew at 37 Signals which really says it all:

Here’s the start of the blog entry to whet your appetite:

CHICAGO—September 24, 2009—37signals is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1…..

…

….In order to increase the value of the company, 37signals has decided to stop generating revenues. “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up. That’s why we’re switching to a ‘freeconomics’ model. We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!”….

I strongly suggest you click here and read it all.

Startup School this November

If you’re planning a Corporate Escape or are an early stage entrepreneur. Then 2 day event I’m running is an investment worth considering. For a very simple reason: It’ll save you many thousands by not having to make all the mistakes I did before I got it right.

What stuff are we covering?

Content taught includes:
- Idea generation
- Idea validation
- Art of bootstrapping
- Setup costs / legal Tips & tricks
- Project / Cash flow management
- Outsourcing ( digital & production)
- Raising capital
- PR – Getting on TV, radio and in newspapers (all of which I’ve done before – see http://www.rentoid.com/about and scroll down)
- Social media tools
- Staffing & handling the growth curve.

All of which will be interactive – and busts the myths of success. You wont read the truth about this stuff in books because the truth isn’t shiny and doesn’t sell. All 10 alumni graduates get me as an on going mentor to help them startup and success like I have with www.rentoid.com.

It also includes food & drink for 2 days. It is $998 for the 2 days. It’s not cheap – bit it’s the real deal. A worthy investment with a money back guarantee to blow your mind.

If you think it’s expensive – then think about this:

• How much is 17 minutes of prime time ‘in program’ TV coverage worth? More than $500,000. I’ve done it and startup school will teach you how.
• How much is full page spreads worth in National Newspapers & magazine worth?
• How much did your last website cost to build? I built www.startupschool.com.au for $220 and I’m not a tech person, designer or a coder.
• How valuable is knowing how to raise Angel and Venture Capital? Or even know the right people?
• What about in market validation without the actual expense of launching?

The point is your investment will pay for itself many times over.

It’ll be running In Sydney and Melbourne for 10 people only. It’s pretty much a one off event. So if you want to come book or seat at www.startupschool.com.au or feel free to give me a call {0438 779 566} for more info. Be quick it’s limited to 10 people only.

Steve

The deception of history

Reading about Craigs list the other day I started thinking about business history and strategy. As entrepreneurs we often get fooled by the deception of history. And it’s easy to see why. All the business books and articles we read on success are based on what someone or some company we respect did. The problem with this is that the world lives in a state of flux, and what worked then, most certainly wont work now. This is where the Craig’s list example comes to the fore.

Would a 3 color page of hyperlinks which looks like the internet did in 1994 work today? Highly unlikely. Craigslist works now, because it worked well then. It had things working in it’s favour like the ‘in crowd’ in the Bay area spreading the word. That it was first to market with an on-line classified. Now these legacy issues become a strategic proposition which is worth maintaining. What it doesn’t mean is that it’s a strategic template worth copying for Startup X. It’s also less likely we’ll get the support needed from the web community or the investors needed.

The same can be said for pretty much any startup with an interesting history.

A social networking site which is set up for alumni of an Ivy League University probably wouldn’t work.

A trading website where auctions are used to develop the perfect market place probably wouldn’t work.

An on-line retailer which aims to sell every book available in the world probably wouldn’t work.

As entrepreneurs, what we are better off understanding is the insights into why things worked, and try and leverage human behavior in developing a strategic direction to launch our business.

Free – is not a business model

Firstly – I’ll start by saying I think Chris Anderson is an incredibly clever guy. I thought his book ‘The Long Tail’ was and is the future of business. But when it come to ‘free’ he has got it wrong this time. As has Seth Godin and all the other ‘free’ converts.

As Malcolm Gladwell correctly points out, they are forgetting many of the fundamentals in business, by getting caught up in the stale newspaper argument, which in the new digital economy, is the easy and soft target of who will disappear. The irony of this ‘newspaper’ argument is certainly lost in the broader economy. The non digital economies are a lot bigger than newspapers and other beleaguered digital industries.

So why is it that ‘Free’ is not a business model. Quite simply, any business without a revenue generation model wont exist over time. We only need look at the the dot com bust of the late 1990′s to see this reality. It’s also much too easy to get caught up in the success of Google and others which ‘started free’ to build demand. But many of the subsequent ‘Free’ offers like Youtube, Facebook, Myspace, Flickr may have been successful for the owners, only because they sold to a business with a large chequebook – not because the business itself was financially successful. The Google business model is not too dissimilar to that of Network TV – generate eyeballs, sell advertising….. Nothing new here.

The real question in the so called ‘Freeconomy’ is how many businesses can be supported by the advertising sales model? So why the idea of ‘Free’ is being touted as new is beyond us here at Startupblog.

Here’s what ‘Free’ really is – it’s part of the marketing mix. It’s the 4th P – Promotion. It always has been and always will be. Anything a company gives away for free is a promotional tool to sell something. If these businesses who use the so called ‘free model’ fail to sell something there are only two options for them as time passes:

1. Go broke & run out of cash
2. Get bought by large company who values what they have created, albeit ‘non-financial’

Whether it be Proctor & Gamble, giving free shampoo in letter boxes in 1957 or Google giving free search and maps in 2009. It’s part of the mix to attract potential customers, who will be converted into on going revenue. It isn’t free. Free is not a business model, moreover it’s sampling & promotion for associated revenue generating activities. So to call it the future of business as ‘free’ is absolute folly.

Sure Anderson can argue that digital stuff is becoming so cheap it may as well be free – as per the transistor example he uses. But the thing that really costs money is building demand and infrastructure – the kind of stuff that’s really expensive. The other point to consider is the example of some things which previously cost money (a newspaper) is now available free on line, doesn’t mean everything is heading down the free path. Rather it means that certain industries are dying – not that ‘paying’ will be a thing of the past. In fact there are just as many examples of items which were once free, consumers are now being charged for Education, Toll roads, Water, Seeds.

The advice I’m giving here is simple.

No business can survive without revenue. Free, isn’t free, but a promotional expense, the 4th P. If your industry is getting flooded with free – it’s on it’s deathbed – look elsewhere. Industries die all the time when the revenue dries up just like those trying to cope with the current digital conversion. Don’t assume you can build something awesome and give it away with the ability to sell it (the business) or something associated later – chances are you’ll run out of money before that.

The future of business isn’t Free, and the idea isn’t new, it’s part of a complex marketing mix. And if you want to own a startup to thrive, my advice is simple. Have a price which isn’t all zeros.