Way out ideas welcome in bootstrap world
Is any idea really too way out for a business model that stresses little or no risk during start-up? Many remain divided on the kind of business that bootstrapping entrepreneurs should focus upon.
The online presence of the Arkansas Small Business Development Center at the University of Arkansas at Little Rock advises:
Avoid ideas that really don't have a future. Before you throw your heart, soul and piggybank into an idea, ask yourself three questions: 1) What problem does my product or service solve? 2) Whose problem does it solve? 3) And how do I know that? In other words, what research did you do to derive your answers to questions one and two?
This is the same advice that most business professionals would give an entrepreneur regardless of the business model being used and it begs the same question. How does any entrepreneur know, even with costly research, which ideas have a future?
Toni Schneider, CEO of Automattic, creator of WordPress.com, told those attending a bootstrapper panel discussion at TiEcon 2006 that the nine founders of Autodesk, a company he had worked for as a trainee, had been unable to predict which of their many ideas had the greatest potential.
Instead of trying to decide, they had simply pursued all of them eventually narrowing their focus as they saw which ideas were taking off and which were not, reported blogger Zoli Erdos, who covered the conference.
But many who witnessed the dot-com excesses of the 90's complain that this lack of focus was part of the extreme speculation of that era. Christopher Kenton, president of the marketing agency Cymbic, wrote in August 2003 for BusinessWeek online:
While venture capital dominated the business landscape, VCs used their formulas and cash to find businesses and products with the best chance of making a profit — at least in theory. The result: A lot of bad ideas and bad companies were tossed into the marketplace.
Still, in an online essay "The Essence of Bootstrapping" in 2001, Arnold Kling suggests that it was the sheer scope of VC financing in Internet enterprises over a more modest bootstrap approach that may have been the problem. Kling writes:
I submit that the venture capitalist credo that the Fundamental Economic Unit is $1 billion is not valid on the Internet. The Internet may create a handful of billion-dollar franchises (I think of eBay and Yahoo! as examples), but I believe that most of the franchise value on the Internet will come in smaller units.
David Weekly, creator of SingleStat.us, a defunct site that allowed subscribers to track peoples' relationship status through online MySpace profiles, insists the low costs of developing online businesses will lead to more experimentation long term.
This is what innovation looks like – a lot of ideas, most bad…Some will do well, often ones that are hard to predict except in hindsight. The lowering costs of experimentation will produce an increasing number of experiments (most of which are inevitably going to fail), so if you don't like the idea of thousands of silly little sites popping up and trying something new, you'd better go take some Dramamine.
June 28th, 2006 at 1:57 pm
Doing research into your business idea makes sense. You should have a sense of the competition, and you should work to answer questions like, “What is the value of this?” and so on.
But at the end of the day, no matter how much research you’ve done, you have to take a leap of faith and go for it.
David Weekly is correct. Startups are springing up all over the place for less and less money. In fact, it’s becoming a badge of honor. “My business cost $500 to start…” “Well mine only cost $100.”
If a business costs $500 to start, and over it’s lifetime it earns even 10 times that, and you love doing it, learn a lot and gain more opportunities, what’s wrong with that? And who knows where it’ll take you…