In early 2007, I was beginning to get ready to depart the warm blanket of my former employer to dive into freezing start-up waters. There was still a huge amount of Web 2.0 startup-excitement here in California, and I was a amazed at the number of “companies” trying to be successful on what amounted to a small feature vs. a sustainable business. I saw an endless stream of them come through Adobe at the time hoping that our conversations would end up in acquisition. Instead, it ended up being a great education for me and highlighting what became a pretty common blueprint for these web 2.0 companies:
- Identify a feature, and build a service around it
- Call yourself a company, and then raise a bunch of money to drive users and usage
- Hope to be acquired before anyone realized you didn’t have a sustainable business model
I am almost as guilty as the people on the list above, since I tried to develop a business using that same model. Fortunately, along the way, I had the opportunity to pitch the idea (a CRM-related concept) to the godfather of CRM himself, Tom Siebel. About one minute into my pitch, my hopes and dreams for this “next-big-thing” in CRM were destroyed when the conversation went something like this:
“Michael, I get it. It’s a good idea, and there’s a need for it. However, if I saw that in the market, I’d put a few engineers on it and give it away for free as part of my CRM suite.”
The painful but correct translation: “It’s a feature, not a business.” That pretty much ended the discussion on that topic, but since I had his attention for the next couple of minutes, we ended up talking about the various kinds of businesses one could go after when starting something new, and why I really wanted to jump into the startup experience. I was able to quickly conclude that I wasn’t interested in a feature-business (my internal monologue after that first minute of pitch was clear), nor a business predicated on being acquired, so that left me with one clear idea: build a sustainable business based on stand-alone profitability.