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Why Start (Up) Now

Amid the gyrations of the stock market, and predictions of a severe economic downturn, I have found myself in the interesting position of launching a start up with my friends at Lullabot and Bond Art + Science. Over the past six years, I’ve worked within the comfortable fold of two well known brands in the media world: Inc. and Fast Company, the last four years as president of a digital division with six websites, 40 employees and more than $10 million in revenue.

Amid the gyrations of the stock market, and predictions of a severe
economic downturn, I have found myself in the interesting position of
launching a start up with my friends at Lullabot and Bond Art +
Science. Over the past six years, I’ve worked within the comfortable
fold of two well known brands in the media world: Inc. and Fast
Company, the last four years as president of a digital division with
six websites, 40 employees and more than $10 million in revenue. Now
I’ve left to be the CEO of a self-funded company formed by Lullabot and
Bond Art + Science that doesn’t even have a name for its product yet
(even the name of the company is just Codename Enterprises.)

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Some people think we’re crazy to do this now. Jason Calcanis wrote a
couple of weeks ago that he expects 80% of the start ups already funded
would collapse because of the down, part of a “start up depression.” And legendary VC Fred Wilson said companies without angel or VC funding in place would probably have to try to make it without VC funding.

There’s an old axiom, “There’s no bad time for a good company” but
that’s a bit flip for the times. After all, some companies with good
products are going to fail this year because of the downturn – they
won’t be able to cut their expenses deeply enough to make up for lost
revenue, and VCs will cut the cord before second or third round
financing becomes available. That’s why there’s some panic in the start
up world right now, tempered by lots of practical advice from VCs about
tucking in for the long winter of recession ahead. Sequoia Capital’s long slideshow shared with their portfolio companies recently is the best I’ve seen on the subject.

With our fledgling company, we only need to move around headcount
numbers on a spreadsheet to make phantom staff we never hired go away.
We’re working lean from day one. If this were a funded start up, about
three million dollars of other people’s money would have been burned up
so far. Instead, we just burned a few more pounds off of Lullabot Jeff
Eaton. (That’s an inside “skinny” joke.) By the way, Eaton talks about
the technical work done by Codename so far, and the excellent
contributions that will ensue for the Drupal project, in this blog post.

That’s been the story for almost a year, now, actually. Day one for
Codename was about ten months ago, when Lullabot managing partner Liza
Kindred and I started talking about how damn hard the Drupal open
source social publishing platform was for the likes of her and me
(non-developers), and seemingly, even for the many developers who were
working on a large project for me. I was in the midst of launching two
of the most complex Drupal-powered sites to date – FastCompany.com and
IncBizNet.com – and the separation between the promise of Drupal and
the practical restraints were fairly maddening. I advised the Lullabots
(the world’s leading Drupal consultants) to start working with Bond Art
+ Science, one of the best user experience firms in the nation. I also
read an amazing post called “How Drupal Will Save the World” by Lullabot CEO Jeff Robbins, that pretty much laid out all the guiding principals that came to be the Codename company.

Some 4,000 hours of development and design by Lullabot and Bond Art
+ Science ensued. The object was and is to build a hosted platform,
powered by Drupal, that gives ordinary people, businesses and
organizations simple tools (like drag and drop or point and click) to
custom-craft websites with features such as multi-user blogs, social
networks, wikis, member reviews and ratings, photo sharing, and custom
form fields. With these tools, even newcomers should be able to build
feature-rich multi-user websites that go well beyond the boundaries of
blog sites, or more rigid products such as WordPress.com and Ning.

“Working lean” is an understatement of what happened. Working for
nothing is what happened. Lullabot juggled consulting and Codename to
make it happen so far. The excellent user interface experts at Bond
similarly kicked in their valuable partner time. An amazing advisory
board has similarly been offering up valuable advice: Jeff Dachis,
former CEO of Razorfish and senior partner at Bond Art + Science; David
Bradley, owner of Atlantic Media; Jeff Veen, founding partner of
Adaptive Path and former design manager for Google; and Lane Becker,
co-founder of GetSatisfaction.com and a founding partner at Adaptive
Path.

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The Product

But “Why Start Now” isn’t answered just by saying, ‘we know how to
do it if we want to, even if it means working lean and in a tight
economy.’ “Why Now” requires a deeper examination of the importance of
this product, especially in tough economic times.

The short answer is that websites that are social and dynamic are
dramatically more useful than websites that are static, and that has a
powerful social implication. In his post,
Jeff Robbins tells the story of a village in Nigeria that allowed an
oil company to use its land in exchange for clean water and schools.
Because they had a website with some flexibility, they were able to
post the contract with the oil company and bring attention to the oil
company not living up to its obligations.

It’s incredible how many organizations and businesses in the United
States, let alone the world, still have static websites where they
can’t even change their business hours without going back to the
developer who built the site for them. The simplest CMS back-end
remains unavailable to them, unless perhaps they keep a blog (which in
all likelihood is hosted elsewhere.)

I switched FastCompany.com over to Drupal in February, making it a
dynamic site for the first time. Within three months, repeat visits had
increased 1000%. The site went from a straightforward publisher to a platform for conversation.
But it took us almost a year to build and the work of half a dozen full
time developers – not something ordinary people or businesses can do.

Yet, think of the practical implications if we could create a widely
accessible web publishing tool with great social tools and format
flexibility:

  • Small businesses in search of leads for scarce business online
    could do a significantly better job attracting and creating a
    conversation with clients. More efficiency means more business and more
    jobs. Really.
  • Small organizations could tap into the knowledge and needs of their
    members, and help them better engage with one another. Stronger
    organizations mean more powerful grass roots social movements. (Or at
    least better organized bowling leagues.)
  • Bloggers could expand their work into real websites, with highly
    flexible formatting of pages and forms, rich tools to interact with
    their readers, and a back-end CMS akin for group blogging to what a
    major publisher pays thousands of dollars for. Better blogging
    platforms mean better information to readers at a time when newspapers
    are disappearing.

Earlier this year I was a judge at a startup competition put together by Jeff Jarvis, one of the great voices of “citizen journalism.”
We were charged with judging the business plans of a group of grad
students who thought running their own websites might be a better
alternative to getting a job. A couple of the plans were, in effect,
community newspapers, and a big chunk of the money they were after
would have gone to pay for development of their sites. A few others
involved more sophisticated dynamic tools: bookmarking, ranking and
rating, user profiles, and the links.

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When our platform reaches its potential, the startup costs for
making these business plans real will drop dramatically. Companies will
launch that would otherwise have never had a shot. And more start ups
equals a better economy — it’s large enterprises that shed jobs during
a recession. Job growth comes from small business.

Drupal is a magnificent modular platform that lets you build most
any website you can imagine. If only you have the special know-how.
It’s hard even for developers to master, though. And that’s not good
enough to reach the mass audience that needs a social platform to build
their websites.

That’s why we’re building a layer between Drupal and the end-user —
a layer that simplifies choices, but leaves Drupal core intact. And
it’s free.

Can we make money with a free product?

Yes.

Some websites will want help with advertising. That something I’m
good at, having grown ad revenue almost 600% during my time at Inc.com
and FastCompany.com. Some will want premium services, like extra
storage space, beyond what we’ll provide for free. And some websites
will want to tap into our expertise in how to maximize a social website
with great copywriting, custom branding, SEO, SEM, and community
building.

The business model for freemium remains viable even in a weak economy. Fred Wilson wrote a good post about this.
The services surrounding a free product can be very valuable, and even
in the worst economy, people will pay to get help succeeding in
whatever is most important to them.

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We’re well aware that plenty of others have their own visions of
expanding social media platforms to more people: Ning with better
social networks, WordPress.com with better blogs; Acquia with better,
supported distributions of Drupal itself.

What we will offer as an alternative is a more flexible format
that’s still straightforward for average users. And we’ll be improving
Drupal all along the way by giving back to the open source project.
Jeff Eaton discusses a number of important breakthroughs we’ve already
contributed in his blog post.

We’ll see over the coming months whether this approach interests
outside investors — outside investment money would certainly speed
things along. But we’re going to keep going in any case.

So why start up now?

Because innovation is always important.

Because getting in at the bottom is how you make the most money in the long term.

Because aggressive companies pick up market share more easily during bad economic times.

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Because efficient ad-supported media, like radio during the great depression, can and do catch hold even when times are rough.

Because, as investor Mike Moritz put it, the best time to invest is when people are cowering under their desks.

Because people need this product.