Web 2.0, the Fate of Dot Com companies, e-Entrepreneurs and Internet Startups

05 October 2007 - By Sean Fishlock

Having been around since 1998, we are one of the few Australian web developers that survived the "dot com" crash and lived to tell the story. We've grown since then but along the way, we've seen our fair share of companies with grand and sometimes bizarre Internet schemes. Some succeed, others inevitably don't.

While we're now seeing the next generation or "Web 2.0" boom, with new ideas and enthusiasm arising from new technologies, the business fundamentals remain the same. So it is important to heed the lessons learned. If you are in the first stage of planning a startup Web 2.0 project, then drawing upon some handy tips can help keep your business off the scrap-heap.

One thing is for sure, most e-entrepreneurs and Internet startups have a certain zeal about them. Many are brimming with confidence and convinced of the potential of their ideas to the point of fanaticism, like it will become their little pot of gold or "field of dreams" (if you build it, they will come). That venture capitalists will knock on their door with blank cheques and that they will eventually be offered billions by Microsoft or Google for their project and retire to a beach somewhere. This sort of enthusiasm in the potential of the Internet is fantastic to draw on, but can be a double edged sword. I have seen people's livelihoods and mortgages thrown out the door in search of the elusive money spinner.

A web developer has a moral obligation to guide and advise its customers as best we can, but it becomes difficult when emotion, passion and hype are involved. We often share the passion for the web with our customers, in some cases we even generate it, but we certainly know the limits and pitfalls.

I think one of the reasons that we have been successful over the years is that we never got personally involved. That is, we haven't invested financially in a client's dot com scheme. We would never, for example, do web development for free for a company claiming that if their dream is realised that there is something "in it for you", no matter how good it sounded on paper. Believe me, we have heard it many times. We consider our client's project is their project. Although we pride ourselves on successful projects, we would never let ourselves be tied to its failure. These days, we set customer expectations with almost extreme care, but at the same time we don't knock back legitimate work. It is important to realise that there is an element of risk in any web project, so our role as advisors becomes very important.

More often than not, the online projects of companies with sound offline business strategies are less likely to fail. But there are also businesses that have succeeded purely on the web. The ratio of business survival generally favours to former. We understand that although some organisations rely on the web heavily, generally companies should not put all their eggs in the Internet basket. The web changes so quickly, that a fully online business can become redundant in the blink of an eye. We have learned to anticipate these changes to the Internet landscape and try to advise our customers, but predicting technology trends has eluded even the most prescient of science fiction writers.

One thing that we have learned (as has the occasional e-entrepreneur the hard way) is that you cannot blame your web development company if your business or business ideas fail. The responsibility and the risk is entirely your own, and that is why it is important to choose a web developer that has plenty of experience in this area to draw on.

From our experience, we have identified some tell-tale signs that a dot com idea won't survive, and I'd like to share the "Do's and Don'ts of a Dot Com" with you.

Never start without a solid business plan

Try not to just go on gut feelings or what is in your head. It should be written down and passed by an accountant or someone else who understands how the business model will work, what expenses are involved and what returns you should expect if the basis of your plans are sound. If your idea needs financial backing, venture capitalists may well be able to give you a kickstart. But consider that although they work with risk all the time, they are much more these days. Like recording studios they see a lot of crazy stuff that might or might not be a hit and in all probability, ideas very similar to yours. After the Dot Com boom, many are particularly a case of once bitten, twice shy. So don't bank on financial backing. Always set conservative outcomes, because as big as the opportunities are, the web is big place and can really separate the men from the boys.

Don't reveal all your whole idea without some sort of non-disclosure agreement

It is dog eat dog out there and there are a lot of unscrupulous people who can take your ideas and run with them. Make sure to research the credibility and reputation of any consultants that you work with. Make sure you get a ballpark budget to work with before you go into too much detail. At the same time you need to strike a balance and make sure that you maintain momentum when you get something off the ground. A lot of good but poorly executed ideas are capitalised on once they are unleashed on the web. So once you have made your decision, move quickly with your chosen supplier. We recommend non-disclosure for all e-entrepreneurial projects, even though we have no interest in using any customer ideas the benefit of ourselves or any other customer.

Don't start work without an identity

Make sure you have a clear plan for your identity. This means your logos, name, colours and other things you'd normally put on a business card or letterhead. You'd be suprised how many startup Internet companies ask web designers to come up with this stuff for them. Most web companies can advise you on domain name and web designs, but when it comes to business names, logos and the like, it is best left to the marketing experts. From experience, we are one of the rare web developers who have the ability to do this sort of stuff when asked to on occasion, but we always prefer if you have an established visual identity to work with.

Avoid changing your business plan mid-way through a website project

This can be disastrous. For example, if you have an interactive website system which is aimed at the consumer market and half-way through the project, decide to instead attack the corporate market, you have effectively changed the scope of the entire project. You may risk exhausting your budget and having a website that appeals to neither market.
To avoid this, try to anticipate changes to your business model before you start your web project.

Don't be unrealistic

A good start is to make sure that your ideas are feasible. A good step is to get some sort of proof of concept.

Don't pretend to understand the underlying technology

You shouldn't need an IT degree to realise that Internet technology has limits, dependencies and special requirements.
If for example, you required a complex web database, you may not realise that the infrastructure required to support it is not your everyday, then don't think that you should be able to host it anywhere or cheaply. You may have to trust that your web host and web designer recommend the right technology solutions for your project, as to try it yourself could end up with a failed project or enormous technical complications. From a business perpective, all that really matters is the cost, make sure you get the full facts initially, don't try to find cheap and nasty shortcuts as they often don't exist.

Don't bite off more than you or your web developer can chew

Never underestimate the difficulty and time required to design and build complex projects. The more sophisticated your ideas are, the harder they can be to implement them. Don't initially be overly ambitious, and make sure that you have the resources to achieve what you are setting out to. Try to set realistic targets for the first step and then organise your project in stages. Make sure that you cater for some form of revenue generation in the first release, or you will be left with a cost centre rather than a revenue centre. If you need more resources, consider sourcing venture capital, a grant, investors or some other avenue to make it a reality, but try to avoid big gambles. Make sure that your developer understands the full scope of your ideas from the outset. There is nothing worse than them missing your grand plans and when it comes time to implementing them, not having the ability to deliver on time and to budget.

It is hard work

Many people think that once the web developer's job is over, they can sit back on a beach somewhere. No matter how good it sounds on paper, you are still going to have to put in hard work. No amount of search engine optimisation and online marketing techniques are going to do the promotion for you. This is hard work. It means keeping your feet on the ground. It means PR, networking and presentations. If it pays off, then start to plan your retirement, but not at least until the ball well and truly starts rolling.

Avoid getting emotionally wrapped up in your project

When you invest in your ideas online, it can be a little like raising your own baby. You invest a lot of emotion. But these same emotions can sometimes compromise your judgement. Sometimes it helps to have someone independent manage it for you. It is hard, but you'll definately be better off for it.

In summary

For your dot com website to be successful, you need to trust your web developer implictly. They should have your best interests in mind and be interested in the success of your project, but never try to tie them to it or blame them for your failures. Those that still have contingencies or fuel left in the tank after a setback and can learn from mistakes and get the right guidance are much more likely to succeed on the world wide web.

We are such a developer, we have experience and we care and as a result, we have helped to nuture many dot com projects that mature and reach fruition over the years. So if you have a genuine idea, and the ambition to turn it into a successful web project, you know where look.

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