Web 2.0 startups in the UK and startup questions to consider
by oneafrikan
Just posted something on start-up questions to consider over at e-Consultancy, which looks at the things you should be thinking about when you’re doing a web 2.0 startup, or startup of any sort for that matter…
Here’s the intro for ya:
There’s a pretty great post on Particletree about the kind of questions VCs ask when you’re doing a startup, so I thought I’d highlight them here as there seems to be a profound lack of ‘noisy’ UK-based Web 2.0 startups, and maybe finding finance is one barrier for entrepreneurs?
Where are all the UK web startups? Maybe everybody is just being very quiet (to fail in complete obscurity), or perhaps things are as dead as they seem to be (more than likely). The UK seems almost entirely barren compared with what’s happening in the US.
It’s probably worth noting that local VCs seem to be a little behind their US conterparts (two local startups that I can think of off the top of my head have been approached by US investors – names of the innocent withheld). This too could be part of the problem.
My take is that you’ve no business starting something without thinking about these questions first, not because I’m this business guru with years and years of experience but because it just makes common sense. My first instinct is to bootstrap as much as possible. If you can survive by bootstrapping then you know you’ll survive for longer than if you take on VC in the first instance in the hope that you’ll find your customers (now that you have oodles of cash in the bank to find them with). Think of it like a wild animal in the bush – if you feed it, you prevent it from learning how to feed itself, the result being that it will almost certainly die because it hasn’t learnt how to survive. However, unlike in the animal world, once you have customers but you need to grow into a market position where you can dominate, taking on VC may be the best choice you can make. These questions should help elucidate that.
Now that I’ve done it for myself, as a public service, I’ve created a Word doc that you can download and print, so you can stick it up on the wall in front of you.. – every time I think of a hare brained idea, I’m going to ask myself these questions and then take a dose of the “reality pill”…
These headings are pretty much the major section headings of a business plan. So yes, if you’re looking for investment – definitely a good idea to write a business plan, I agree.
Pain, solution, market, competition, team, projections…
Standard stuff but definitely necessary when looking to get investors turned on.
I’ve been talking to a lot of investors recently and it’s clear that startup web businesses without solid revenue models will fail to attract investment in the UK. In the US, many ‘Web 2.0′ businesses have raised in excess of $5m while in private beta – and that’s just not going to happen here – unless the VC you pitch to has a US arm.
The upshot – the UK will not fall nearly so hard when the next bubble bursts, but we won’t produce the next Google over here either!
Hey David
Yea, and that’s the problem for me – the UK won’t produce anything near to Google if the attitude towards innovation doesn’t change. At the same time, I’m a strong believer in solid revenue models more because I’m interested in creating a sustainable business that will outlive myself than anything else – without that real revenue, you don’t really have a business – you may have a new technology stack, and you may have rounded corners, but you’re not really a business, you’re just a cool site – which I fear many of the US startups you’re / we’re referring to above are…
Anyways, wil be interesting to see how things play out over the next 18 months…
Hi again,
I hear what you guys are saying about the need for a revenue model upfront and that that could be a problem.
It is possible to create a Google because they were built on a solid foundation of revenue generation, however it may be more difficult to build niche products like Writely, del.icio.us, etc as they are only valuable as part of a whole and therefore their revenue model is buy me.
Companies like 37 Signals have a montra of keep it simple and do what people need not what they wish they had. I like it. Its leads to good solid all empowering software down the road while solving the most important issues today.
I don’t know I am of two minds on this, but I think we are stretching when we say a google can’t be incubated out of the UK.
Interestingly, Google successfully raised capital without any plans to make money from advertising. The founders originally had no interest in advertising as they thought it would ‘devalue’ their search service and they later reluctantly went for text based ads as they were the least obtrusive option. I’m fairly sure that in the UK, with there original proposition, they would have struggled to get the initial capital from traditional UK Angel networks and VCs – but there are always ways and means and great entrepreneurs always find a way.
But that is the challenge faced by advertising-based revenue models. In order to be of significant value – you have to have the eyeballs. In order to get the eyeballs you often need money. And to get money from UK investors, you need a revenue model from the start.