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On Projects vs Businesses

Here's an interesting presentation a friend sent me, that offers Frank Levinson's list of top ten must-haves for any startup company:

The video is a little dated (eek! made in 2001! how many web-centuries ago is that?), and while I agree with almost everything Levinson says, the presentation got me thinking. Some observations:

1. B2B. Levinson bases his advice on his own experience -- always a good thing -- where in his case he did a huge B2B play (Finisar). If you're doing B2C or C2C, most but perhaps not all of his advice makes sense. For example, if Facebook, or even Google, had strictly followed all ten of his steps would they have ever gotten anywhere?

2. Projects vs. Businesses. The reality, imho, is that "startup" no longer necessarily equals "business". Many "startups," even well-funded ones with luminary VC and angel backing, are "projects" and are not businesses. Projects don't have customers, they have users (if they're lucky). Lots of startups start as projects -- sometimes derisively called hobbies -- and if they're lucky they become businesses later. Few startups, it seems, at least in the consumer web 2.0 and mobile app spaces, start as businesses but if they do they sometimes do spectacularly well with revenue right out of the gate (an example would be Groupon). Often, and this isn't necessarily a bad thing, but often it is, a startup project is based on an underlying idea where the idea is essentially nothing but a "missing feature" of some other company's product. Usually these types of "feature" projects fail. Sometimes the other company learns about and likes the feature and implements it itself, leaving the startup in a precarious state.

3. Execution. Startups start with an idea, a vision. Ideas and visions on their own are not startups. Only when you add execution do they become startups. Execution is focused energy, and the energy comes from the talent. When you have a huge amount of energy and you can focus it really well, the result should be really great execution. You can have a supremely well-executed project (Google, Facebook) that takes years before it becomes a business. But startup ideas never become projects which never become businesses, without execution. Most projects do not have great execution (perhaps the project lacks great talent, or lacks focus, or both), hence the predominance of failed startups. As has often been said, great execution is far more important than having a killer idea. Sometimes having even a so-so idea, but having killer execution, is the key to making a great business.

4. Ecosystems. Successful internet projects are ones that create thriving ecosystems -- or figure out how to position themselves well and prominently within an existing thriving ecosystem -- or figure out how to make themselves the missing ingredient that takes an existing dull ecosystem and turns it into a thriving one. The ecosystem then helps the project transition into becoming a business. I'd argue Eventful followed this path, partially creating an ecosystem (Demand it!), and partially inserting itself into an existing one (entertainment biz).

5. Achieving Sustainability. Someone once said, "the difference between a hobby and a business is that a business has a billing system." Perhaps the "project" to "business" transition is akin to the famous "Crossing The Chasm" model. Some entities that start as projects never find a way to turn users into customers, or never are able to identify/invent other entities in the ecosystem as the "customers" (the ones, as Levinson correctly points out, who actually fill out PO's and write checks) while the users continue on their merry way (for example the Google/Facebook model of the service(s) being free, and the "customers" being the advertisers). If you can't figure out how to turn your startup project into a business, it probably will won't be sustainable.

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