I have to admit that I’ve been a bit overwhelmed by today. I’ve just about glazed over as I’ve gone through blog post after blog post talking about how grim and dire things are for us. I realize that the week has been legendary in terms of the stock markets plunging, but the response from many startups and bloggers has been far more than emotional than logical.
I guess that on Wednesday when I spoke of the optimism I have gained from my prior experience, I imagined that everyone would be infected by my visions of sugarplums, unicorns and rainbows. Instead, today has been filled with proclamations of the death of Web 2.0, layoffs, and depressing photo essays. Obviously, I realize that it may take a bit more than one single screed to turn the tide of emotion that seems to be sweeping over most of us, and I don’t intend to relent.
Our own resident cranky geek Steven Hodson was the first to chime in, and with many of the same sentiments I had:
The trick here is know that as human beings we have the incredible capacity to pick ourselves up, dust ourselves off and try again. We are an incredibly resilient people which we have proven over and over again. We did it in the 1980’s and again in the late 90’s. While we may not seem to learn lessons from those experience it doesn’t stop us from getting up each morning and trying once more.
Rob Diana echoed those sentiments:
This is the type of time that separates the wheat from the chaff. Those who can not survive may be able to sell off their assets in order to start something new. As Steven said, “are we going to feel pain?” Absolutely, but there is a lot to learn from pain. You learn not to do the same things. Personally, I think we will see some interesting ideas start to appear, and they will be created cheaply. Innovations in technology will continue to appear, but consumer prices will drop in order to stay competitive and affordable.
Perhaps one of the more interesting responses was Veritocracy CEO Lee Hoffman, who took the thoughts I had in a different direction:
At the end of the day, a society’s economic standard of living is based on the ability of its people to do more with less resources. Less time, less money, more output. The United States (and, increasingly, the world) is filled with brilliant, creative, and entrepreneurial people. This financial downturn may take a serious toll, but the tools that we have to deal with it are the best they have ever been.
The three of them hit on a few salient points that bear reiteration. As Steven and Rob say, many of us have been here before, and one of the key factors that separates the wheat from the chaff (in tough times particularly) is perseverance. And as Lee said, in a time where less capitalisation may be available, those that do more with less will come out ahead on the other side (and as he and I agree, it’s never been easier to do more with less).
Necessity is the mother of invention, though, and the need to streamline budgets during a lean time will spell increased demand for certain types of businesses. A few immediately spring to mind, though I’m sure there are many others.
Co-Working Spaces: Very recently, we featured an Austin area co-working space that made a significant impression on me. Beyond the fact that I think it’s a great idea in general for companies looking to save on costs and be in a position to grow their business through networking opportunities. This is a type of business that’s growing quickly right now, as several have popped up in other areas of the country as well. San Francisco has enough so that it’s difficult to spit without hitting one. CenterNetworks has showcased a number of coworking spaces recently, including New Work City and IndyHall.
One of the things that really struck me about Conjunctured out in Austin was that it was a completely bootstrapped effort that seems to be paying off already. John Erik Metcalf gave the blueprints to how they made this happen at an interview he gave us at the SummerMash Austin event.
Bootstrapping and Growth Based Businesses: Bootstrapping a business (or as we used to call it years ago, making your business “growth based”) is one sure-fire way to build a sustainable business under these circumstances. Of course, if they nay-sayers are all right, we’ll all have no credit to speak of and it could be our only option for new businesses for a while, but if a business is able to make due on their own they can come out the other side much stronger.
Business
Even before the catastrophic times of the last week or two the more folks I talked to both at events and via contacts made for story pitches at Mashable, it seemed I was hearing more about folks shunning the angel funding and venture capital route for the bootstrapped method.
It requires a more sharp business mind at the outset of the business than your typical VC-backed startup. There are a lot more pitfalls in a growth-based business, too, since you’re operating without a net most of the time. Whereas in the instance of a venture backed firm, if you’ve made a gross miscalculation, I’ve heard many stories of where the business plan they started with has been modified beyond recognition to continue through the many rounds of financing. With a bootstrapped business, you’re still required to be nimble and responsive to market changes, but you’ve got less chance to get it wrong before you’re out of business.
In the end, the rewards are greater since you haven’t halved your business a few dozen times with the many investors, and if at the end of the day you have something successful, you’ve got greater freedom and share of the spoils.
Collaborative Tools: This is an area that has a lot of potential for growth, at the very least for existing players. Much of what is possible in this space has already been done, but for what’s there already could see a lot of growth as companies try to put the clamp down on unneccessary spending for travel. Meeting tools like GoToMeeting and Webex immediately spring to mind, but Web 2.0 tools like Google Docs and Zoho which allow simultaneous editing of documents can also see more heavy usage and user growth.
Virtual conferences and online seminars are also going to see an uptick. Next to personel costs, travel budgets to conferences (particularly winter conferences like CES) are insanely expensive. The ability to network, meet vendors and learn from presenters with live video and advanced communications tools like Twitter, IM and inline chats all have the capability to replace (or create a suitable fascimile thereof) of the conference experience.
Idea Marketplaces: There are a growing number of idea marketplaces on the web these days. I’ve actually looked at several under embargo in the last week or so, and they’re all getting more and more specialized for individual niches. In the past, companies have been bought and sold via places like SitePoint, eBay and even Craigslist, but what’s to come will be more specialized marketplaces so that weekend projects and bootstrapped efforts can be turned over to portfolio companies and larger organizations that want to rapidly add to their available services.
Workforce Marketplaces: This is going to be perhaps one of the more dicey and interesting sectors to watch as it develops under the coming economic shifts. Sites like Rent-A-Coder and GetAProgrammer are all international marketplaces where finding someone to do the grunt work on a project all generally go the the lowest bidder. It’s difficult for most citizens of first world nations to compete with the much lower costs of living overseas where the talent often matches American talent in most areas.
This is both good and bad. A lot of work can be accomplished for very little cash, which is good for the cash-strapped business. Working with overseas contractors comes with its own set of issues, though, and this often precludes a lot of out of work talent in the US from finding work by these means.
Again, this means that a lot more niche marketplaces will start to spring up. Back in March, I spoke with Ross Kimbrovsky and Mike Samson of CrowdSPRING, founders of a specialized marketplace for design. In the conversations I had with them, they admitted the problem that international marketplaces often had, but explained to me checks and balances set up both in the mechanics and dynamics of the community that create an equal playing field for all market participants while still allowing for affordable quality design.
My guess is that if the overall economy continues to shift much further downward (and stay there a while), these are the types of marketplaces we’ll start to see spring up and gain traction.
That’s Not All, Folks…
This isn’t an exhaustive list, but just an example of a few existing sectors and growth areas in our industry that’ll see some positive numbers in a down economy. I’m sure you can think of even more.
Given the fact that everyone has been morosely plodding through the week and seeing nothing but desparation for the future, I figured that another does of sunshine might be in order. I think that our business, that is the so-called Web 2.0 and Social Media business, is probably most suited to make it through tough times unscathed as compared to the rest of the economy.
We’ve fortunately made it past our tipping point. The world knows that they need to be on the Internet, they know they can use it to efficiently connect to new and existing customers (something they’ll be wanting to do more than ever, soon), and we have ironed out the ways to do it. Look at this as our distribution phase. We’ve been innovating for quite a while on the technology side, now we’ll be turning our attention on innovating and making more efficient the business side.
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