Social Web Giants have Problems in Developing Countries

Services like YouTube and Facebook are distracted by their primary markets. They don’t have the time, the resources, the know-how or the local context needed to figure out what works in a country like Uganda. This creates new opportunities for local entrepreneurs with bright ideas. People who can appreciate local circumstances and innovate the business models that make the difference.

via Ben White, ICT 4 Entrepreneurship

After the controversial article in the NYT ('In Developing Countries, Web Grows Without Profit') there has been a heated discussion on the future of the advertising-based business model for the social web in developing countries. New business models and approaches are desperately needed and I'm sure we'll see them coming from these countries.

A New Kind of Science

I came across a feature on Stephen Wolfram recently where he talks about his newest service: WolframAlpha, a 'computational knowledge engine'. I was intrigued and dugg a little deeper.

One can always in principle find out how a particular system will behave just by running an experiment and watching what happens. But the great historical successes of theoretical science have tipically revolved around finding mathematical formulas that instead allow one to directly predict the outcome. Yet in effect this relies on being able to shortcut the computational work that the system itself performs.

via Stephen's book: A new kind of science.

Complexity and shortcuts. Reminded me of the current crisis that we're in which in big part is due to shortcuts. So what if you apply this thinking to economics - where we study how societies (made up of many individuals) allocate and manage their resources? Everything that happens in markets, in production or consumption, is determined by the involvement of many individuals, their perspectives on the world and of course the informations that they possess and process when they take decisions. This would be the 'computational work' that the system performs.

Much of economic theory takes shortcuts here. Maybe that's also one of the reasons why the system seems flawed.

Unwinding the Free Business Model

We’re currently moving through a period of disequilibrium. The prevailing price structures and ways of doing things are unlikely to be viable in the long term. As more eyeballs move to internet connected devices, the supply of advertising inventory is going to grow explosively and it is going to become cheaper and cheaper for advertisers to reach massive audiences or just the right audiences. But as advertising fees decline, web publishers are going to have to find other revenue streams to survive.

via David Evans on Catalyst Code

Although the article takes a closer look at the publishing industry, the same is true for web start-ups relying on advertising as their only business model. What is the 'mixed model' (free + premium content in the publishing space) for your idea?

Rule of Three for Start-ups (by the founder of LinkedIn)

1. Every net entrepreneur should explain how they will rise above the noise to attract a massive audience, how they will get to 1m and then 10m users. 
2. They should have a unique value proposition, backed by a product which is sufficiently innovative to distinguish itself from the pack, but not so forward thinking as to alienate the user.
3. A capital efficient business plan. (via Nic Brisbourne)

With these three elements in place – mass audience, unique value, stable funding – a startup has time to discover where it can make money. [...] The formula is to build an audience with a great product – then secure enough funding to figure out how to make it pay (via Techcrunch)

Interesting thoughts here by Reid Hoffman. With many endeavors on the web it is possible to be very capital efficient (at Tagcrumbs we are living this) to have enough time to build your product, your audience and figure out where you can make money. Once you find this toehold it's time to get some financial backing on board to grow what you have.

Vitamin or Pain Killer? Start-up Thoughts.

Many products fall into the vitamin category. Things like productivity tools, content aggregators, mashups, utilities, collaboration applications, measurement and monitoring tools, in fact anything that is a tool, development or otherwise, is by definition a vitamin.

Pain killer products are products that solve for a specific pain point. Sometimes the pain is measurable in terms of ROI, winning sales that could not be won before, or satisfying a regulatory requirement.

There is another set of products that are "vitamins" (nice to have) until you feel the pain. Then they become "pain killers" (got to have it). There are actually lots of products that fall into this category.

via Don Dodge on The Next Big Thing.

Don describes a helpful taxonomy for start-ups to think about their product. Depeding on where your product sits, your business has to think about the impacts on (business) functions: marketing, communication and sales efforts - what do you communicate and how? I have also come across the term 'enabler' instead of vitamin as well but I like the image. Flow Ventures proposes a method to find out whether you have a pain killer or vitamin.

The third category sparks a very interesting question as well: what are the events that might change the clients' perception of your products from vitamin to painkiller?

Finding an Investor: The Deck

We have a mission and a team that is taking us there. Why? We discovered a large problem and solved it with a product that has this amazing technology inside. We’re going to market and sell it to these customers, with these advantages over our competitors. In particular, we’re working towards these milestones over the next few quarters. In conclusion, this financing is a great investment opportunity.

via Venture Hacks.

This is an interesting paragraph as it shows all the important points that your deck should include and shows why this structure makes sense. The only one that is left out is a summary, which should come right after you presented your mission.

Why a startup's initial business plan doesn't matter that much

A startup's initial business plan doesn't matter that much, because it is very hard to determine up front exactly what combination of product and market will result in success.

By definition you will be doing something new, in a world that is a very uncertain place. You are simply probably not going to know whether your initial idea will work as a product and a business, or not. And you will probably have to rapidly evolve your plan -- possibly every aspect of it -- as you go.

(The military has a saying that expresses the same concept -- "No battle plan ever survives contact with the enemy." In this case, your enemy is the world at large.)

It is therefore much more important for a startup to aggressively seek out a big market, and product/market fit within that market, once the startup is up and running, than it is to try to plan out what you are going to do in great detail ahead of time.

(via Marc Andreessen's Blog pmarca: http://blog.pmarca.com/2007/07/why-a-startups-.html)

Excellent post that makes a point why it is so difficult to plan ahead for a start-up. Your initial idea might be great but you might find that there's no market at all, you're too early or too late, you haven't got the ressources to establish your business in the marketplace or you just find another approach on how to build your business.