Originally published 12/09/09 on Portfolio.com.
When we started our most recent business, ClickMarkets (in shared office space with a decent broadband connection and high powered laptops), we did all the same things we did at our last big endeavor. It was the usual drill: develop a value proposition, craft a brand and market entry strategy, put together a financial model, pull together a team, set up an infrastructure and eventually actually sell services to our first customers. But this time there was a big difference: it took a lot less of money and time to get to that first dollar in sales revenue, thanks to technologies that have vastly reduced selling, marketing and administrative costs in setting up a new venture. This has freed us up to invest our money and time in the development of what is core to our business, and run very lean, and bootstrap our company through sales revenue, not grow using Other People’s Money.
I’ll even put numbers on it: what cost a minimum of $500K, took 9 months and lots of engineering talent in 2004 can be done today, thanks to technology changes, by smart people with some web awareness or the willingness to learn for less than $20K in three months. It’s not that we’re doing this business on duct tape and baling wire, either. We’re working with very clean, professional services that can scale, and which just a few years ago cost a hundred times as much to put in place.
As a former venture backed CEO and 18 year industry vet, I’ve been an insider on creating some of these technology shifts- but it’s only now, as we’re applying them in our own new startup, that we really understand their real impact from an operating perspective.
The following 5 major tech enabled trends have saved us money AND improved our business in the process.
• Trend 1: The Open Source Movement
• Trend 2: Technology Enabled Distributed Workforce
• Trend 3: Social Media
• Trend 4: Software as a Service
• Trend 5: Online Productivity and Communications Tools
We see that these trends don’t just impact new businesses, but are also applicable to established businesses of all sizes.
Trend 1: Open Source Everything
The Open Source Movement makes it easy to launch a functional, commercial and robust web presence at a fraction of the cost. Usable Open Source Software and business applications cut down the cost of building really robust, functional websites.
Example: We used the free open source Joomla (www.joomla.org) content management system to build our web presence, including user registration, email and social media management and ecommerce – and to avoid using developers to interpret our content and place it on the web.
• Cost savings: $25,000.
• Extra Benefit? Day to day control of our own site content without developer intervention.
Stable open source infrastructure coupled with “virtualization” means startup costs and support costs go down.
Example: Instead of a Windows NT product hosted on our servers at Rackspace, we started with a Virtual Private Server on an open source LAMP stack at a professional hoster.
• Cost savings: $25,000
• Extra benefit? Not having to worry about servers and databases.
The availability of images and graphics under Creative Commons and easy to procure stock licenses, through sites like FlickrPro (www.flickr.com), iStock (www.istockphoto.com) and Getty Images (www.gettyimages.com) means we can turn our marketing into highly professional work in a matter of minutes. Professional quality tools embedded into the Mac means we can create multimedia this way, too.
Example: Instead of paying a photographer to create custom marcom images, we started with stock work, cropped and colored it in an interesting way and were good to go.
• Cost savings: $10,000 • Extra Benefit: Faster Time to market
Trend 2: Access to a Global, Distributed, Specialized Workforce
We get a lot of things done faster, on a global time clock, with good quality and at a low cost- direct access to by the hour specialists in any field.
Through global talent marketplaces (sites like Odesk (www.odesk.com) and Mechanical Turk (www.mturk.com), we get instant access to contract and project talent, with ratings and safety protections, in moments.
Example: We hired specialists to work on Search Engine Optimization, or building contact lists, or identifying competitors, in small chunks of time (5 to 20 hours), with very little administrative overhead.
• Cost savings: $45,000
• Extra Benefit: Broader Breadth of skills.
Online collaboration tools such as drop.io (www.drop.io), Google docs (www.google.com) or project management applications like Intervals (www.intervals.com) make it easy to do work with distributed teams, and mobile devices keep people connected anywhere.
Cost Savings (in office rent and infrastructure): $24,000.
Extra benefit: These technologies allow us to leverage and support people who are only able to be partially in the traditional workforce, even though they have great talents to share, and to structure our own lives more flexibly.
Trend 3: Social Networks
Through Social Media, we can reach our natural audience in minutes, at a cost must lower than traditional advertising, email marketing or keyword buys.
While word of mouth has always been present, social media has created a Technology-Enhanced Network Effect. The emergence of Facebook (www.facebook.com), LinkedIn (www.linkedin.com), Twitter (www.twitter.com) and Ning (www.ning.com) based specialty sites as consolidated dominant networks, & their adoption by adults, has changed the world. This time around, we have instant access to a global pool of self nominating, highly connected interest groups- at no cost other than the labor.
• Cost Savings: $60,000 in keyword marketing.
• Extra benefit: We’re having a conversation with our audience, not talking at them and trying to persuade them.
Trend 4: Software as a Service
SaaS means that little guys like us, just getting started, have access to to big company level professional functionality and analytics for tiny price points. We get easier process, and data to make decisions, without huge implementation burdens.
Example: In our startup, we’re using Intervals for online task and project management, CVSDude (www.cvsdude.com) as a subscription version control software, Google Docs and Lovely Charts (www.lovelycharts.com) and a variety of other online applications that make it easy to run our business. Plus, we know that the bigger SaaS players (Salesforce.com (www.Salesforce.com) for CRM and SpringCM (www.springcm.com) for docs) will be there when we’re ready.
• Cost savings: Irrelevant- we would not have been able to implement these apps- enterprise versions of this and the projects to get them going are in the 10s if not 100s of thousands of dollars.
Trend 5: An Explosion of Cheap & Good Productivity and Communication Tools
Whether it’s the actual cash offset of being able to use free VoiP instead of a telephone system and landline, or the time savings inherent in reducing all the annoyances of being small and young are reduced through the proliferation of Online Productivity & Communication Tools, we’re loving the way digital tools have changed our business.
Examples: We’re completely paperless. We don’t have a Landline, we have Skype (www.skype.com) -in and eFax and mobile phones. We use online schedulers like Doodle (www.doodle.com), and leverage every media tool in the iLife suite. This has reduced overhead and administrative costs.
• Cost Savings: $8,000 in telephony costs and $24,000 for an intern/assistant.
With all of these dropping barriers to entry, where do we invest/what hasn’t changed?
The extreme capital efficiency enabled by these tools shortens the time and money needed to get to revenue, but we’re still investing, only not in infrastructure. We invest in original creative work and good design- to support both the products and the brand. We invest in market research. We invest in differentiating custom code. We invest in training people and partnering and learning. We invest in responsive service.
It’s not all easy- you still need to work hard and pay attention, have clear intentions and vision, and build a business that offers something better, faster, cheaper or more unique. But these trends sure have reduced the required capital to get things going, in a very short amount of time.
