The biggest occupational trend in the restructuring of the economy has been the newly minted entrepreneur. The media regales us with stories about the new startup incubators like Y Combinator, and the success stories of their progeny. All roads to developing a new business point to leveraging the Internet with some sort of social, commercial or mobile business model.
All new entrepreneurs face five hurdles in developing a new online business:
- Business model. The first step is the hardest. You need to fix a problem, and it’s best to leverage your previous work experience to identify the problem and craft a solution.
- Programming – what does the app look like and do? The second step is just as daunting as the first.
- Creating the simple business plan and timeline. The faster to execution, the better.
- Funding. How to bootstrap this? You won’t likely have a network set up to reach VCs and other institutional investors, but crowdfunding may be viable.
- Go to market strategy. Execution of course is the most critical step to success.
1. Business model: Identifying the problem.
- First timers should start local. It’s easier to build traction when focused on a small arena.
- Building a service is easier than a product (but remember, VCs and investors generally shy away from service businesses because they are hard to scale). The most alluring aspect of building an online product like Instagram or Pinterest, is the potential to explode. Unless you have access to programming or funding, don’t try building a product. One exception is to clone a product idea for the local market using third party services that provide “plug and play” white label templates, like Chompon for building Daily Deals businesses.
- Use your local network and past experience. For example, there is now a huge window of opportunity to help local businesses develop social marketing expertise on a turnkey basis. If you have established a local network, you can build this service business like Apsides Media Group and Socially Now by partnering with turnkey social media solutions providers. (Note: we help to build these kinds of businesses).
- Chances are the new entrepreneur has no experience on the Internet beyond buying stuff at Amazon. Hiring a programmer is a major challenge because you don’t know how to create a spec, and it’s impossible to tell if the programmer is good and the price is right. The best way to build the web service is to teach yourself WordPress or use Tumblr to create a simple model of what you want. That’s your homework. I believe building the web service prototype yourself is important to understand how it will enable the business model.
- The prototype can look clunky. It needs to reflect the business model, and you need to confirm with your peers and potential users/customers whether there is demand for your service. Iterate until it makes sense. Pivot if you’re going down the wrong track.
3. Create a simple business plan
- The days of a 100-page business plan are over, unless you are the type who likes to do this. Business plans can be conceptually templated by taking hot or successful business models and applying them to new industries, geographies or service sectors. “Shared economy” or “collaborative consumption” business models are 2012’s buzz and can be implemented at a local level because most sharing requires physical proximity. Here’s a list of startups in this space. For example, if you know the hardware business, you could set up a city tool sharing model similar to Toolspinner.com.
- One more great resource for new business models: The Unhyped New Areas in Internet and Mobile
- I’ve added funding before going to market because a new business generally needs a little startup capital to launch. Startup incubators like Y Combinator and Techstars are getting a lot of press as the new bush league for venture capital. You’ve heard that one needs a personal introduction to a VC or investor, or to get admitted to an incubator. That’s true, but most newbie entrepreneurs don’t have the networks to access these funding channels.
- Crowdfunding is a new way to connect entrepreneurs with small change investors by presenting your business plan via sites like Kickstarter and Indiegogo (here’s a long list). Crowdfunding has reached credibility, and this may be the best route for the newbie without a startup track record.
- Closely associated with crowdfunding are services devoted to leveraging founder networks and partnerships to bring business teams together. Founders Network, Founder Dating, and Angel List are examples of these matchmakers.
5. Go to market strategy
- Before launch, the web service will likely need some professional app development to make the user interface credible. It’s quite possible to continue to use WordPress, especially if you’re flexible to pivoting and plan to change messaging occasionally. By this stage, you should have developed a business plan that can potentially attract a team, including partners or co-founders who can help with technical development.
- Your goal should be to prove that the business model is viable for a community. The execution stage is obviously critical, and in the next articles, we’ll look at various go to market strategies.