March - 2007 - issue > Cover Feature
9 things to remember while chasing the Web 2.0 dream
Rajesh Setty
Wednesday, February 28, 2007
For me, Web 2.0 is all about harnessing the full power of the web. It means getting web applications to look like desktop applications (think: Google Maps) and engaging the members of the community at an entirely different level (think: Digg, Reddit) Last month, an aspiring entrepreneur told me that he was working on a Web 2.0 startup, an area that he considered was going to be ‘hot’. I was happy for him, and asked him what problem he was solving or what opportunity he was creating with this startup.

He seemed puzzled by the question. I won’t go into the details of his answer, but it reminded me of those booming dotcom days when having a website was considered the same as a business, and actual business value was almost irrelevant.

I’m not saying that Web 2.0 is the next dotcom bubble, but the similarity is interesting. Ask ten people to define Web 2.0, and you will get ten different answers. That seems to be the sign of a buzzword, not a real business concept. So as you consider entrepreneurial opportunities in 2.0, it’s wise to consider some of these lessons from the dotbomb field.

1. Don’t chase exceptions – make them
YouTube got sold for more than a billion dollars without making any money. Fark and Plenty Of Fish, two other high-profile startups, have only one employee. So should you model your new company on one of these? Probably not. These examples are exceptions, not the norm, and trying to replicate an exception is rarely a good idea. Once the media and investors are all over it, it’s not an original idea anymore.
So rather than chasing an exception, create your own!

2. You can’t forget the team
First comes the team, then everything else. Web 2.0 projects are no different. Even the most “viral” ideas first need people to come together to design and deliver the solution. As Jim Collins says, you got to have the right people in the right places on your bus.

3. You still need a sound business model
During the dotcom days, there were business plans on the back of an envelope that got funded. Certainly that doesn’t happen today, but then again, venture capital is no longer an absolute requirement. With open source going mainstream, the technology costs involved in starting a new web-based business are very low. So this time around, self-funded entrepreneurs may be burning their own money, instead of other people’s, trying to build a flawed business model. Web 2.0 or not, you need a solid foundation of value to build a business.

4. Do what works, not what’s cool (Ajax)
Yes, Ajax is cool, and everybody seems to be using it. But customers are not going to choose your service or product only because it is Ajax-enabled. While you can pretty much ajaxify (sic) everything, think first about whether it’s necessary for what you do.

5. Lay the right foundation for the next few versions
Design the first version of your product or service with high standards – but be aware of the challenge you set for yourself. You can’t compromise on the standards after the first version is out, because you have made an implicit promise to your customers and prospects on what is yet to come. But maintaining those same high standards for future releases can be extremely costly if you aren’t prepared, so lay a solid foundation for fulfilling expectations.

6. Emphasize agility
If your model is so cool that just two people can execute it brilliantly, remember that any other twosome out there may be able to challenge you quickly. You can’t ride for long on the first-to-market train – if you’re onto a good thing, competition is certain to be sneaking up on you. The best way to protect yourself is to design and configure everything to be agile, so that even if you are met with surprises, you can change course quickly and maintain your lead.

7. Build to scale (rapidly)
It hurts to fail because you have no customers. It hurts even more to fail because your idea attracted too many customers, too fast, and you couldn’t service them. In the Web 2.0 world, it can happen all at once, so be ready to go big. Make sure from the outset that the solution you’re building is built to scale.

8. Choose the right metrics
Just because another successful startup earned a lucrative exit based on numbers of website visitors or page views, there’s no guarantee those metrics will work for your company too. Forget Web 2.0 for a moment and think about your business. What metrics will you need to track to be successful? Don’t do something just because everyone in the Web 2.0 world is doing it. In fact, that’s a very good reason to do something different.

9. Involve your customers right from the start
Don’t assume you know what customers want – ask them. With the fast cycle time in the Web 2.0 world, it’s easy to get carried away with your idea without having enough information. The best way to delight your customers with your product or service is to work with them from the outset and get their feedback. Knowing their expectations and beating them is a great way to create a ‘wow’ experience – for them, and for you.

Rajesh Setty is a serial entrepreneur and investor based in the Bay Area, where he is involved in several web 2.0 businesses – Suggestica and iPolipo among them. Rajesh is also the author of “Beyond Code” (foreword by Tom Peters), published in the US and India.

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