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Business Model Redux

August 20, 2004

Scanning the roster of recently funded startups and tracking the startups that are getting ahead, we are struck by the lack of business model innovation in the market. More than ever VCs are funneling capital into quickly growing sectors, regardless of how crowded the space might be. Much of the action is focused on wi-fi, VoIP, anti-spam, and wireless games. Marching orders are: don’t try anything fancy, just get out a decent product in a hot area.
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Time to Re-read The Old Playbook


Burned, risk-averse entrepreneurs have been appropriating business models from dot.com deadpool companies and having good runs. The idea is that the original companies blazed trials, developed software, trained employees, then failed when the cash dried up. The models, in many cases, were not as flawed as we thought.
Fresh Direct in New York has enjoyed great market acceptance doing the same things Webvan did, just expanding at a far more moderate rate. Gratis Internet has done well for itself by giving away products in exchange for locking in consumers to marketing programs. This is the same model pursued by companies like PeoplePC and FreePC – ventures that were roasted as exemplars of dot.com excess. Even Interactive TV and video-on-demand, notions that were championed back in the mid-90s by Larry Ellison, are being recast by a number of companies like CinemaNow, MovieFlix, and Starz. Now, even the once-lucrative domain name game has been resurrected – creditcards.com was recently bought for a cool $2.75M.
There are a number of cases where bubble-era entrepreneurs have circled back to their once-discarded ventures. Witness Webshots, which was sold at the top, then crashed, and was re-acquired by its founders for pennies on the dollar. They recently sold Webshots again, this time for $60M to CNET. All this resurrection goes to show what now seems obvious: the market was wildly inefficient throughout the boom and the bust. Now let’s see if this current batch of start-ups can remember the lessons of those who came before them.

Read – Making Free iPods Pay Off
[Wired News]
Read – Technology: Will Pay For Food [St. Petersburg Times]

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