Running an Internet Start-Up: Then and Now. Summary of TVG Event

Gillian Hatton, President of Cybersensibilities and AIMS member and blog correspondent sends in the following summary from a recent Toronto Venture Group (TVG) event…

Event: Toronto Venture Group, December 13, 2006 “Two Solitudes: The real differences between running an Internet start-up now and during the dot-com boom”

Mark Evans, VP of Operations for B5Media was the guest speaker at the December meeting of the Toronto Venture Group. The talk was billed as being of particular interest to entrepreneurs and venture capitalists alike to hear about the realities of today’s dot-com business.

Mark began by giving us some information about B5 Media. The company operates the world’s 3rd largest blog network with over 2m unique visitors per month. It is an online publishing operation with various categories spanning celebrities and entertainment to technology and copywriting. He has been writing about the Internet since 1995, and was the Senior Technology reporter for The National Post. He also experienced the first wave of Internet companies through founding Blanketware, a natural language software company.

Summarizing the talk as ‘Then and Now’, he encapsulated his ‘then’ experiences as “It’s all about the Chairs”  And assured us this would become evident later on.

He went on to talk about his experience with Blanketware, a web2.0 company before there was web2.0. I could relate.  I extolled the virtues of one to one marketing only to be frustrated by the limitations of the web at that time.

Blanketware raised $0.5 in Angel seed capital and went on to…fail.

However, in the true Tom Peter’s spirit of “all success are built on failure” the experience was, in the words of the MasterCard ad: Priceless.

Mark illustrated the dubious commercial nature of the early dot-com business by showing us A typical scrap paper business plan. It went something like this – get a website – pitch to VCs – IPO - $$$$.

If only life were so simple. I did wonder in those heady days what would happen if I made a dotcom VC pitch with some squeegee kids…

In those days dotcom business was all about the money and little to do with entrepreneurialism. The news at that time was full of stories about the money and the latest billion dollar IPO.

Now it is not all about the IPO. Google might have been an exception to the rule but a start-up Internet business without a viable business plan is not going to go anywhere. Today’s start-ups have to do it on their own.

eBay, Excite, etc. etc. the list of great deals went on and on. And with these mega-deals came the excesses. The cool offices. Case in point: Blanketware - 2000sq. ft. of loft style in a prime downtown location. I sympathize. I remember the trials and tribulations of hiring staff in those days. The ‘cool’ office was definitely a draw.

We were then treated to a visual tour of the B5 Media space. Spartan and home basements are the order of the day.  I would add that we should not forget start-up folklore. Many a mega deal business originated in the basement, garage, bedroom…. Wherever.

Today it is about prioritizing expenditure and having due care with money. Business decisions have to be made on a commercial basis.

Not then. Mark gave just a few examples of early dotcom excesses. Blanketware’s re-branding exercise cost $30K and they were left with a new name Diatra which reminds me more of a prescription drug than natural voice software.

And now to the chairs. The web consultants involved had purchased 300 at $1000 a pop.  Crazy when you consider they had just received $30m in funding. But they were far from alone. To be fair this was a time when it was easy to get caught up in the irrational exuberance!

And what about NRG whose focus was to provide teenagers with VC capital? Hey you have to catch them young! The fire sale was good – Mark got a $750 ping pong table for song. I was reminded of spectacular failures like Boo.com who burnt through a $300m funding from luxury goods giant LMVH in no time.  Heady days indeed.

Mark pointed out that today it is much less expensive to run a company. In the post-2000 crash world start-ups should leverage the numerous open source tools and free resources such as Skype, You Tube, Fresh Books, and Writely.  He also questioned the merits of traditional conferences citing opportunities to network through groups such as Mesh, Third Tuesday, and Toronto Demo Camp.

Mark then contrasted this philosophy with the early dot-com conferences when we all came away with bagfuls of souvenirs. I often wonder if my long deceased dot-com co. logo tees will go the same as way as those of vintage rock-concerts.  Of course SWAG is a complete waste of money. 

We are now in the era of pragmatic enthusiasm.

There is a fear of a web 2.0 bubble prompted by the purchase of YouTube by Google (and now the CEO of Facebook saying $1bn is not enough).

Mark finished by pointing to the lessons of two books, Built to Last and The Essential Drucker. The entrepreneurial spirit is alive and well and today’s dot com has to be  a sustainable business. The fundamentals never change.