How The Economics Of A Startup Have Radically Changed: Chris Shipley Reports

The economics of startups are really changing, and if you are still thinking "oh my god, how am I going to find the money and capital I need to carry out this great new web project I have in mind", you may be getting out of touch with reality.

Photo credit: Bluestock

As I myself have been telling my colleagues and contacts for a long time now, you really need no major capital to prototype, pilot and test out new project ideas that could then convert into living proposals for possible venture capital.

And the more time goes by, the more this becomes true.

New technologies are making it easier and easier to create, model and experiment with new creations at the expense only of your personal time. The disruptive potential of Web 2.0 technologies is really brining entrepreneurial power into the hands of just about anyone who wants to believe to be one.
Chris Shipley, the woman behind the event-conference that brings many of these new technologies to the public, has just published a short but insightful article that is both an intelligent reflection about the new economics of a startup, as well as good call for her upcoming DEMOFall conference, for which she is setting the stage with some anticipation.

Thanks to her kind permission and openness to sharing, here it is in full, just like she published it the other day on her own site and newsletter.

Intro by Robin Good

 

 

Enterprise infrastructure ready for Web 2.0 disruption

by Chris Shipley

Photo credit: Bellestock

A funny thing is happening on the way to preparing for DEMOfall 2007, the product launch event scheduled for September 25 - 27 at San Diego's Sheraton Harbor Island hotel.

While much of the technology market has turned its attention in lockstep to Web 2.0 widgets, mashups, and the general disruption of the social Web, pockets of very bright engineers are working on some disruption of their own across a range of enterprise infrastructure.

Much has been said of the disruption of Web 2.0 to the ecosystem of early stage companies.

The economics of startups have changed dramatically.

Open source and open APIs mean a very little bit of capital and a lot of ingenuity can take a small startup a very long way. When economics shift like this, the entire ecosystem of early stage software companies shifts.

Marketing budgets have gone to near-zero, having given way to guerrilla marketing and blog PR. Large IT companies are hustling to adjust and become more agile in the face of rapid change.

The venture market also faces disruption.

Startups need little or no venture capital, and that challenges the prevailing model of venture capital economics. VCs raise large funds to invest in significant amounts, across a manageable portfolio of companies. That works when it takes $20 million or more to get a company to a potential $500 million or more exit. It doesn't work so well when a $100,000 here or there may yield a sub-$100 million exit.

With so much disruption in the software development ecosystem , it's no wonder that the market isn't paying close attention to enterprise infrastructure. But it should.

Photo credit: Stephen Van Horn

In the past week, I've talked with two companies that will bring to market products that will shift the economics of enterprise communications and storage by orders of magnitude. That's a pretty big claim (and, sorry, you'll have to wait until DEMOfall for the details), but these companies are completely credible and in test markets with a number of customers.

What's exciting about this shift is the cost savings, of course. Reducing both capital expenses and operating expenses by hundreds of thousands of dollars while maintaining and in many instances improving performance and reliability has a huge impact in and of itself. But these new capabilities have another interesting effect: they make high-bandwidth, data-intensive applications feasible to all levels of an organization.

Imagine if anyone in the company could assess, on demand, high-quality videoconferencing capabilities, for example. How might that change the way that work teams collaborate across a global company?

It's easy to get distracted by the buzz and cool-factor of Web 2.0 and miss some substantial innovations in other parts of the market - innovations that will have a profound impact on how people work together.

Fortunately, DEMO keeps an eye out for these innovations and we'll bring them - and all the cool Web 2.0 stuff, too - to DEMOfall in September.

Originally written by Chris Shipley and first published on DEMO as "Enterprise infrastructure ready for Web 2.0 disruption" on July 10th 2007