The article was originally titled “6 Startup Lessons for the Year 2007“. Today, it is 2009 and it seems many of the lessons mentioned in the article are as applicable today, if not more so, as they were back in 2007.
Web 2.0 startups are on a general trend towards focusing on ever smaller niches. A flurry of startups have come about over the past couple of years thanks to the low market barrier and increased competition. In order to survive today, startups must incorporate the following in their operational and business strategy:
1. Divide and Conquer, Differentiate or Die:
The Law of Division dictates that all categories eventually diverge. They always have and they always will. It is this divergence that creates opportunities for new startups. The best way to build a company is not by going after an existing category, but by creating a new category you can be first in. In other words, the survival of a startup requires that it diverge and then specialize. Markets favor the extremes.
2. Generally Speaking, the Smaller the Niche, the More Loyal the Users Become:
For many startups line extension is the easy way out. It is perceived as the inexpensive, logical way to grow. Only when it is too late does a company turn and notice that they became large at the expense of their user loyalty. Focus is the key to successfully building a community in today’s ultra-competitive marketplace.
Companies, especially the larger ones, have a natural tendency to expand their line of business. Expanding out too fast has annihilated nearly every empire and its army in history. In a competitive environment, more is often less because with more you lose your focus.
4. No Small Market is Small Enough:
The web presents a huge opportunity for markets of any size. That is the great thing about niche startups; no market can ever be too small. Even better, as the size of the market depreciates, so does the threat of a larger competitor jumping in for the share.
5. Mind Numbingly Simple:
Extra clicks are deadly.
We tend to think of boredom on social networks as arising from a lack of stimuli. A sort of information underload. But more and more commonly, boredom is arising from excessive stimulation or information overload (often through excessive advertisements). In a world where startups are as common as ants in the jungle, it is important not to overload the user with information. Complicated user interfaces do not help anybody.
It follows that an unfocused startup will undoubtedly complicate things by forcing extra features onto a web page. Users like mindless choices so get rid of the question mark lurking over the user’s head.
6. Bubble Burps:
It is no secret that almost all startups will fail. This problem started with the bubble, and continues to plague the web today. Comparatively, not much money is flowing into startups so there isn’t going to be another dot-com bubble. However, I anticipate that the failure rate for startups will remain the same, if not worse. The biggest single barrier to the development of an effective startup strategy is the strongly held belief that a company has to appeal to the entire market. In today’s world, if a revenue less business model doesn’t kill your startup, a more focused competitor will.
Please read the full article “6 Startup Lessons for the Year 2007” over at ReadWriteWeb.