A couple of weeks ago I wrote a couple of posts about the opportunities for “small organizations to do big things”:http://www.geekfun.com/archives/000594.html , and the impact this might be having on the “venture capital”:http://www.geekfun.com/archives/000598.html industry.
This past week, Joe Kraus, co-founder of Excite and JotSpot “wrote about this dynamic”:http://bnoopy.typepad.com/bnoopy/2005/06/its_a_great_tim.html in his blog, noting that:
bq. “Excite.com took $3,000,000 to get from idea to launch. JotSpot took $100,000.”
The reasons are pretty familiar: adecade of progress in Moore’s law, open source infrastructure, globalized labor markets, and search engine marketing.
He wraps up his post by outlining how this changes an entrepreneur’s relationship with Venture Capital.
David Heinemeier Hansson, one of the people behind “Basecamp”:http://www.basecamphq.com, goes “further than Kraus”:http://37signals.com/svn/archives2/entrepreneurs_angels_and_the_cost_of_launch.php :
bq. As part of a debt-free company that didn�t need angels to launch and is operating on revenues instead of VC, I naturally have a somewhat different perspective. […]
bq. Now that all the fixed costs are gone, you�re left with the requirements of time and passion. […] I think that story is actually a lot more interesting since its not just lowering the costs of an existing model, it�s throwing it out and opting for a new one entirely.
bq. As mini-investments from VCs and angels become the next big thing, I hope more crews will think hard and consider whether they could do without. Look at the project that costs $100,000 and figure out how to make it cost $20,000 over the shoulders of three guys. Do it out of your own pocket and you�ll be forced to reckon with constraints earlier and more intensely.
bq. Constraints drive innovation and getting your idea out in the wild in two months instead of six will likely do you a world of good. A month or two out the gates, you�ll have a pretty good idea of whether you �got something� or not.
This is why I think the VC industry is in for some interesting times.