I am beginning to see the end of a cycle in the tech community, and a more Darwinian time ahead.
There are too many “me too” products, too many tools masquerading as products, and products masquerading as total solutions. All these new startups will not survive.
So rather than invest as this point, I’m doing a lot more advising. The environment for these nascent companies going forward will be very complex and competitive, and they will have to know a lot more about differentiation, brand strategy, getting and keeping customers, and bottom line, making money.
At this point in the cycle, the rubber hits the road. Even if you have raised money, there’s no guarantee of more, as investors sit back and wait to see what is made of their original investments.
One of the precipitating reasons for this post was the launch of Chime.In by Bill Gross. Coming so soon after Google Plus, Chime.In reminded me that I am now in the habit of checking Facebook, Twitter, and G+ multiple times a day, and checking in occasionally on Foursquare. And now Chime.In, with its compelling interest graph, has joined the fray.
By the way, none of them bring me business, except in very indirect ways. My business still comes from word of mouth and personal meetings. When was the last time you chose an advisor merely from status updates?
Last week, Cathleen Rittereiser, an early adopter friend of mine, described the circumstances under which she “fired” Foursquare. Over dinner, with a hilariously funny delivery, she conjured up the image: “It was the middle of the winter, and I walked into the lobby of a store carrying a couple of shopping bags and wearing a winter coat, gloves, scarf. I dropped all everything on the floor and struggled to find my phone while standing in the middle of all this clutter so I could check in. And suddenly I thought to myself, ‘Why am I doing this?’ I couldn’t find a good answer, so I fired Foursquare.”
We have all been in that position. Increasingly, we are going to have to choose among the embarrassment of social riches we’ve been given. For us, the choice may be clear: family over strangers, news over family, recruiting over friendship, interest over geography. We make a decision. For the companies that have made these products and accepted outside funding, the stakes have just gotten higher.
They will be forced to make money, just at the time we “fire” some of them.
Because I advise so many companies both in and out of the Bay Area, I’ve seen this before: The companies who have grown fat and happy on investor money are less well-equipped to sell a product that people want to buy. I exempt Facebook from this, but not Twitter. I still don’t see a path to sustainability, beyond acquisition, for Twitter. In a way, you are more fortunate it you haven’t been funded, because you probably have customers.
If you are smaller than Facebook and Twitter, as 99% of startups are, this is your time to take stock. And I don’t mean equity; I mean to appraise your business model and perhaps accelerate your customer development.
[Image: Flickr user mikeisgoing]