Saturday, April 19, 2008

Startup 2.0, Examination of the Transformation

This is a repost of my introductory post on


Part 1:

When did this begin? At what point did the shift occur?

Does it matter?

No, it only matters that we recognize it, try to understand the transformation and to see where it's going.

What am I talking about? I'm talking about the new garage startup, call it Startup 2.0 (or 3.0, 7.0, the number doesn't really matter just the recognition that its all changed), where companies/products/services are built in weekends, brands are built through social networks, viral isn't enough, software is free, music is almost free, the list goes on.

Startup 2.0 still requires great imagination and inspiration but it rewards execution much more than 1.0 in my opinion. Companies that can think AND act in the same sentence achieve success while the plodders simply get left behind. I'm sorry but I think the "turtle" model is DOA, at least from a startup perspective.

Its important to note that what changed was the not just the entrepreneurs but the market itself. The combination of low cost highly accessible data storage, ubiquitous net access and a philosophic transformation: that users would create and share content - created this new market. Now the user became ultimately important and who you are and who your friends are matters. What you create has a new value. Maybe more importantly users are willing to create for the fame more than the fortune even if that fame is relatively small and short lived. Call it "social celebrity", a new kind of status that can achieve above the "D-List" but rarely reach it, but that's OK. New web services grew to take advantage of this content and make it easy to show, share and comment - and the Social Web was born.

The Social Web is the most significant transformation in the last decade of the web other than the rise of Google. I think the Social Web would not have grown without Google, creating instant revenue streams to Social Networks, Blogs, and Web based Apps, regardless we are now living in the midst of the Social Web revolution. Companies no matter how large or small must take notice or watch their competition leave them behind.

This movement has created a market where platforms were developed (Facebook, Myspace, Open Social) to support the users and the new behaviors. These platforms created new markets for entrepreneurs and bleeding edge companies to create highly niche viral services and create large user bases. The question still remains if companies can monetize these users but the barrier to entry has been reduced drastically, you can now develop services that scale and can grow with extremely small budgets. Again the key is create/execute here.

New models have been launched to leverage this new paradigm, YCombinator should be looked at closely by any business person wanting to understand whats happening with Startup 2.0. YCombinator ( is seed funding new startups and connecting them with other entrepreneurs to accomplish two goals; one to provide seed money (usually less than $20k) to get an idea launched, and two to assist the companies in getting across the chasm to being market ready. This approach signifies the transformation of the traditional Venture Capital and even Angel funding models.

As a serial entrepreneur this brave new world is both exciting and disrupting, I guess its nice to know that in the face of all thats new, the old standards remain true: What Doesn't Kill You Only Makes You Stronger!

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