The Dubious Value of Starting a NEW Business …

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In the last couple of weeks I have had a re-birth of sorts. I have seen the new vision of entrepreneurship in another phase of the Internet industry that is just starting and promises to be the source of the next tide of wealth.

For the last 20 years I have been working in what had been an emerging industry — the Internet. It all started out with a lot of money and activity aimed at creating the future but, as with most new industries, the creation of the technology that would power the future was extremely expensive. Also, many of the startups of the dot-com era were just too far ahead of the technology, so they failed and the technology they spent million$ on was sold off for thousand$ and built the next generation of startups. This is how new industries get started. I wrote an article that went viral at the time: Bonfire of the eVanities.

Well, the Internet industry has emerged and is now mainstream.

For years, my thinking centered around starting something entirely NEW. You know, identify the pain and find a way to solve the pain. A whole decade of entrepreneurs have been searching for pain and ignoring the value that sits staring them in the face! Would-be Internet billionaires pitch ideas for products and services to serve niches that are only half-way interesting. I have to admit that I rarely hear a totally new and exciting business idea anymore. 

Perhaps this is why there isn’t a feeding frenzy on the part of venture investors anymore. They’re tired of backing good but not revolutionary ideas. They want to see at least 3 years of revenues before they’ll invest because they know from past experience that the totally new idea that will revolutionize the Internet is normally a chimera. 

I totally understand why people spend long dark nights of the soul devising startup ideas.

From where most people sit these days, the prospect of getting a great job is … well … daunting at best. You get out of school with a load of debt and the only jobs available seem low-paying and low-opportunity. Or you have been laid off from a great job and have no prospects of being re-hired by anyone at that same level. Or you took early retirement and need to work to supplement your income. Under these circumstances, putting together a startup can seem like the answer to all your problems.

The real truth, though, is that for most people a startup venture is just the beginning of their problems. 

A startup is pure risk. I don’t care how great the idea or how thorough the planning, it is still pure risk. That is why it is so difficult to get financial backing from anyone but Mom and Dad and your best friends.

One of my specialties has always been showing my clients how to bootstrap their startups to avoid becoming the victims of vulture capitalists. I believe in building a revenue base and using that revenue to power innovation. A flow of reliable revenue attracts even the most skeptical investors.

Do you think the cloud is where you want to create your innovative idea? Why not start with this already-established provider.

Have an idea for an eco-friendly product line or an entrance into cultivation of organic foods or medical marijuana? Your base of operations might be well served by an already-established enterprise.

There are three forces at work that you should know about:

The Builders and Sellers – There are tech-savvy people who build web properties, set up all the sophisticated SEO and advertising income, and then sell the turn-key operations. Similar to franchises where you buy a turn-key operation, these situations are better because they already have customers and revenues.

The I Want to Do Something Else Sellers – There are a lot of people who started web enterprises years ago and have built them up to be successful operations, but want to move on to something else. These web properties produce valuable consistent revenue and can be built on using your own ingenuity.

The Scammers – Yes, there are people who build a website and populate viewership using techniques that produce worthless traffic. That is why you should be careful to use a web property broker that does research into the validity of the seller’s claims. Not all do this.

The point I am trying to make is that it isn’t necessary to come up with a great new idea to get started in a business of your own. It is possible to buy an existing revenue-producing web property, get financing for the purchase, and use it to build out your most innovative ideas.

There is also another trend you should know about:

The Web Property Investment Funds – Many revenue-producing web properties require just a few hours a day to update the content,  SEO and advertising. There are investors who hire tech-savvy people to do this, and maintain a fund of income-producing web properties. This is a new space for the private capital crowd and it is going to grow.

I really encourage you to look into this emerging industry. As always, I am available if you have questions vduff @ abusinessplan.com