Posts Tagged ‘finance’

The Startups…

Friday, June 12th, 2009

… can’t live with them but you surely can’t live without them. They are the driving motor of the internet economy (or one might argue that they drive the entire economy). They also spark the innovation: if you take the most famous websites that come first in your mind you will see that most of them have once been humble startups. And not only have they started very low but they also rose very fast.

But things aren’t so nice when you step into the startup world. You soon discover that almost every person dreams a startup dream and most of them even try to pursue it. Those people often have little knowledge about the technology needed and/or the business they’re trying to get into. All of them start with an idea. The problem with the idea is that most of the time it’s either (technologically, legally, morally, financially etc.) impossible to implement or if it’s an “original” idea there are probaly hundreds of people that already had that idea and tried to implement it but you haven’t heard of them yet.

I have actually seen projects that were looking for people to implement either a better Google or a new operating system that would run programs from all other operating systems but without having the other operating systems problems. Not bad ideas per se but the real idea is the implementation plan which is usually non-existent . These people even had a decent budget behind them and maybe that’s a even bigger problem: the fact that these crazy ideas actually get financed sometimes to the detriment of some good ideas.

It’s all about times and fashion. If it’s a good time for investments a lot of projects get financed even if most of them are bound to fail. If there’s a recession many projects die because of lack of finance even if they are viable. The finance people have even less knowledge or interest in technology than the entrepreneurs; they are usually more interested in markets, trends, hypes, coolness – the bottom line is they don’t care what it is as long as it sounds cool because they think that everybody (including your client) thinks the same way. The same “fashion” thing applies to project ideas too: a few years ago everybody wanted some kind of Youtube clone. Nowadays everybody wanta some kind of local YellowPages with Google Maps mashups.

The third thing after financing is getting the work done. As we have already seen the entrepreneur doesn’t know how to do it so they have to hire somebody. And because of the tight budget they usually preffer the cheap option: either project bidding websites, outsourcing companies or offshoring their business themselves. The result is usually some guy(s) in some very remote part of the world that do the job for very little money. Sometimes the entrepreneurs are lucky and get a very well done job for very little money but sometimes they’re not. It’s really a lottery but it also depends on how you buy your ticket.

Usually offshoring the development yourself provides much better results but it’s more expensive – so it’s not for everyone. Outsourcing companies sometimes provide good quality but it really depends on the company and the complexity of the project: if you want something which is technologically advanced they have a good chance of failing because they don’t have the necessary expertise. Getting to individuals or project bidding sites usually works only for fairly small tasks – it’s really a circus out there. Unfortunately many times there’s no corelation between the quality of the work and the cost in any of these methods; that’s the risk you have to take when you use outsourcing or offshoring. The trouble is that many people don’t know the magnitude of this risk while some others overestimate or missinterpret the risk – either way they loose.