Tuesday, February 26, 2008

Ten Rules for Web Startups

#1: Be Narrow
Focus on the
smallest possible problem you could solve that would potentially be
useful. Most companies start out trying to do too many things, which
makes life difficult and turns you into a me-too. Focusing on a small
niche has so many advantages: With much less work, you can be the best
at what you do. Small things, like a microscopic world, almost always
turn out to be bigger than you think when you zoom in. You can much
more easily position and market yourself when more focused. And when it
comes to partnering, or being acquired, there's less chance for
conflict. This is all so logical and, yet, there's a resistance to
focusing. I think it comes from a fear of being trivial. Just remember:
If you get to be #1 in your category, but your category is too small,
then you can broaden your scope—and you can do so with leverage.

#2: Be Different
Ideas
are in the air. There are lots of people thinking about—and probably
working on—the same thing you are. And one of them is Google. Deal with
it. How? First of all, realize that no sufficiently interesting space
will be limited to one player. In a sense, competition actually is
good—especially to legitimize new markets. Second, see #1—the
specialist will almost always kick the generalist's ass. Third,
consider doing something that's not so cutting edge. Many highly
successful companies—the aforementioned big G being one—have thrived by
taking on areas that everyone thought were done and redoing them right.
Also? Get a good, non-generic name. Easier said than done, granted. But
the most common mistake in naming is trying to be too descriptive,
which leads to lots of hard-to-distinguish names. How many blogging
companies have "blog" in their name, RSS companies "feed," or
podcasting companies "pod" or "cast"? Rarely are they the ones that
stand out.

#3: Be Casual
We're moving into what I call the era of the "Casual Web" (and casual content creation).
This is much bigger than the hobbyist web or the professional web. Why?
Because people have lives. And now, people with lives also have
broadband. If you want to hit the really big home runs, create services
that fit in with—and, indeed, help—people's everyday lives without
requiring lots of commitment or identity change. Flickr
enables personal publishing among millions of folks who would never
consider themselves personal publishers—they're just sharing pictures
with friends and family, a casual activity. Casual games are huge. Skype enables casual conversations.

#4: Be Picky
Another
perennial business rule, and it applies to everything you do: features,
employees, investors, partners, press opportunities. Startups are often
too eager to accept people or ideas into their world. You can almost
always afford to wait if something doesn't feel just right, and false
negatives are usually better than false positives. One of Google's
biggest strengths—and sources of frustration for outsiders—was their
willingness to say no to opportunities, easy money, potential
employees, and deals.

#5: Be User-Centric
User
experience is everything. It always has been, but it's still
undervalued and under-invested in. If you don't know user-centered
design, study it. Hire people who know it. Obsess over it. Live and
breathe it. Get your whole company on board. Better to iterate a
hundred times to get the right feature right than to add a hundred
more. The point of Ajax is that it can make a site more responsive, not
that it's sexy. Tags can make things easier to find and classify, but
maybe not in your application. The point of an API is so developers can
add value for users, not to
impress the geeks. Don't get sidetracked by technologies or the
blog-worthiness of your next feature. Always focus on the user and all
will be well.

#6: Be Self-Centered
Great
products almost always come from someone scratching their own itch.
Create something you want to exist in the world. Be a user of your own
product. Hire people who are users of your product. Make it better
based on your own desires. (But don't trick yourself into thinking you are
your user, when it comes to usability.) Another aspect of this is to
not get seduced into doing deals with big companies at the expense or
your users or at the expense of making your product better. When you're
small and they're big, it's hard to say no, but see #4.

#7: Be Greedy
It's always good to have options. One of the best ways to do that is to have income. While it's true that traffic is now again actually worth something,
the give-everything-away-and-make-it-up-on-volume strategy stamps an
expiration date on your company's ass. In other words, design something
to charge for into your product and start taking money within 6 months
(and do it with PayPal). Done right, charging money can actually
accelerate growth, not impede it, because then you have something to
fuel marketing costs with. More importantly, having money coming in the
door puts you in a much more powerful position when it comes to your
next round of funding or acquisition talks. In fact, consider whether
you need to have a free version at all. The TypePad
approach—taking the high-end position in the market—makes for a great
business model in the right market. Less support. Less scalability
concerns. Less abuse. And much higher margins.

#8: Be Tiny
It's standard web startup wisdom by now that with the substantially lower costs to starting something on the web, the difficulty of IPOs, and the willingness of the big guys to shell out for small teams
doing innovative stuff, the most likely end game if you're successful
is acquisition. Acquisitions are much easier if they're small. And
small acquisitions are possible if valuations are kept low from the get
go. And keeping valuations low is possible because it doesn't cost much
to start something anymore (especially if you keep the scope narrow).
Besides the obvious techniques, one way to do this is to use turnkey
services to lower your overhead—Administaff, ServerBeach, web apps, maybe even Elance.

#9: Be Agile
You
know that old saw about a plane flying from California to Hawaii being
off course 99% of the time—but constantly correcting? The same is true
of successful startups—except they may start out heading toward Alaska.
Many dot-com bubble companies that died could have eventually been
successful had they been able to adjust and change their plans instead
of running as fast as they could until they burned out, based on their
initial assumptions. Pyra was started to build a project-management
app, not Blogger. Flickr's company was building a game. Ebay was going
to sell auction software. Initial assumptions are almost always wrong.
That's why the waterfall approach to building software is obsolete in
favor agile techniques. The same philosophy should be applied to building a company.

#10: Be Balanced
What
is a startup without bleary-eyed, junk-food-fueled, balls-to-the-wall
days and sleepless, caffeine-fueled, relationship-stressing nights?
Answer?: A lot more enjoyable place to work. Yes, high levels of
commitment are crucial. And yes, crunch times come and sometimes
require an inordinate, painful, apologies-to-the-SO amount of work. But
it can't be all the time. Nature requires balance for health—as do the
bodies and minds who work for you and, without which, your company will
be worthless. There is no better way to maintain balance and lower your
stress that I've found than David Allen's GTD process. Learn it. Live it. Make it a part of your company, and you'll have a secret weapon.

#11 (bonus!): Be Wary
Overgeneralized lists of business "rules" are not to be taken too literally. There are exceptions to everything.

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