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Wednesday, April 17, 2013

When will you call it a Business?

Article first posted in May 2007. Totally stand by what i wrote and in fact am validated by the current batch of startups which are all revenue oriented.  And notice the names i mentioned. One got acquired for $12M by Singtel just last year!

When will you call it a Business?

I have been having an email discussion back and forth with an NTU TIP alumnus and I realize that what we are talking about may be of interest to the wider community.

Below is a reproduction of my email in terms of what constitutes a real business. I wrote in an earlier email that many web 2.0 efforts are not real businesses (without any negative connotation) and was asked to clarify further.

“I am a little more old school in my thinking. To me a business needs to have a clear business model. A real business as I put it, simply means a business model that has been validated by the market place or at least seems close to being validated. And validated means not just revenues (cuz anyone can spend $2 to earn $1, but it will never be profitable) but clear path to profits. So using this definition, sites like , sharedcopy are more of tools (really cool tools at that) but until they evolve to gather revenues and more impt show potential for profits, I would not call them a business. It is telling that I think they do not have a clear team running it full time which is a pre-requisite for any business. Not to say that down the road, they cannot gain so much traction (mindshare) and raise more money and have a full time team and grow it on the path to profits. Then I would say they have made the transistion from a cool tool to a business.

A good case would be facebook, myspace, youtube etc. Depending on when you looked at them, intiially they were cool tools, fun sites, hobbyist sites etc. Only when they started taking funds, building revenue and in youtube case, joining google, did a path to profitability appear. Then we consider them a real business. Whether sustainable long term is another question.

For Singapore, I see very little real business using the above definition. A lot of good ideas, hobby sites, cool tools but no real effort to monetize or even work full time on it. I think most high profile 2.0 example is this company called Velvet Puffin. Even though I do not like their stuff, but at least they got money, have a full time team, cut deals and are trying to make revenues and profits. It is easy to build a site, have a cool idea and stay at that level hoping for mindshare and usage. But I think we should not fool ourselves and think it is a business. It becomes one only if there is an active plan for profits and revenue and if there is a full time mgmt team to do it. Whether self funded or otherwise does not matter. That is why i mentioned , hungrygowhere, blurbme. At least they seem to have full time people working on it with marketing budget, sales packages to offer clients, etc etc. Everything which a real business has to have.”

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