Today Read Write Web, one of the net’s foremost technology and digital media blogs (and I’ll admit that it’s a personal favorite of mine as well), posted about the current web 2.0 climate, comparing it to a petri dish – lots of experiments are taking place and no one really knows what’s going to happen. Contributor Bernard Lunn says:
“The Web 2.0 world is looking increasingly like a giant petri dish. There are so many experiments, so much innovation and, as yet, relatively little real revenue. Within this petri dish are a few ideas that will turn into billions of dollars, at which point we will all say “why didn’t I think of that”? There are also lots of “what on earth were we all thinking” ideas out there. Numerically of course, there will be much more of the latter – but in $ terms the few big winners will mean it’ll all make some kind of sense in the end.”
Now, the Knight News Challenge is not about on awarding funds to companies based their earning potential (after all, they want more corporations that think about the double bottom line), but revenues are the lifeblood of any company, and it’s important for any entrepreneur who is thinking about building something web 2.0ish to realize that very few companies are actually making any real cash on the web. However, the entry bar and general costs of doing business are still set extremely low, so there is not going to be a lack of people who are going to try to make the big bucks.
Lunn’s petri dish metaphor is extremely apt – lots of people experimenting with this and that, hoping to grow into something big and valuable. He goes on to cover the current state of web 2.0 in a very realistic manner that is best described as cautious optimism, and ends with some advice to startup founders and other entreprenuers:
“1. Raise more money (a lot more) than you think you need. VCs have plenty of money to put to work and you need enough to ride out a cycle and really build something to last. Jason Calacanis said he raised enough for 5 years with Mahalo and he has seen a cycle come and go.
2. Get to cash flow positive quicker than you had planned. (And if you are already there, don’t take this as the time to start a major expansion built on borrowed money).
3. Accept that offer. Not the first one of course. Not the second one if you have good poker nerves. But take the third one. Live to venture another day.”
Perhaps his advice is little obvious, but really, the current financial climate is not the time to engage in major building on borrowed money. What’s the solution? Stay small and lean (with all the current technology, there is no need to have a huge office or other costly accoutrements, especially in a company’s early days of existence), or you could look for funding from non-venture capital sources, such as grants or contests like the news challenge (c’mon, you knew I was going to mention that).