New Rules for the New Internet Bubble

3/18/11Follow @sgblank

(Page 2 of 3)

hype, spin, expand, and grab market share – because the sooner you got your billion dollar market cap, the sooner the VC firm could sell their shares and distribute their profits.

Just like the previous 25 years, startups still built every possible feature the founding team envisioned into a monolithic “release” of the product using “Waterfall development.” But in the bubble, startups got creative and shortened the time needed to get a product to the customer by releasing “betas” (buggy products still needing testing) and having the customers act as their quality assurance group.

The IPO offering document became the playbook for startups. With the bubble mantra of “get big fast,” the repeatable methodology became “brand, hype, flip or IPO.”

2001 – 2010: Back to Basics: The Lean Startup

After the dot.com bubble collapsed, venture investors spent the next three years doing triage, sorting through the rubble to find companies that weren’t bleeding cash and could actually be turned into businesses. Tech IPOs were a receding memory, and mergers and acquisitions became the only path to liquidity for startups. VCs went back to basics, to focus on building companies while their founders worked on building customers.

Over time, open source software, the rise of the next wave of Web startups, and the embrace of agile engineering meant that startups no longer needed millions of dollars to buy specialized computers and license expensive software—they could start a company on their credit cards. customer development, agile engineering and the lean methodology enforced a process of incremental and iterative development. Startups could now get a first version of a product out to customers in weeks/months rather than months/years. This next wave of Web startups, social networks, and mobile applications now reached hundreds of millions of customers.

Startups began to recognize that they weren’t merely a smaller version of a large company. Rather they understood that a startup is a temporary organization designed to search for a repeatable and scalable business model. This meant that startups needed their own tools, techniques and methodologies distinct from those used in large companies. The concepts of minimum viable product and the pivot entered the lexicon along with customer ciscovery and validation.

The playbook for startups became the agile + customer development methodology with The Four Steps to the Epiphany and agile engineering textbooks.

Rules For the New Bubble: 2011 -2014

The signs of a new bubble have been appearing over the last year – seed and late stage valuations are rapidly inflating, hiring talent in Silicon Valley is the toughest since the last bubble and investors are starting to openly wonder how this one will end.

Breathtaking Scale

The bubble is being driven by market forces on a scale never seen in the history of commerce. For the first time, startups can today think about a Total Available Market in the billions of users (smart phones, tablets, PC’s, etc.) and aim for hundreds of millions of customers. And those customers may be using their devices/apps continuously. The revenue, profits and speed of scale of the winning companies can be breathtaking.

The New Exits

Rules for building a company in 2011 are different than they were in 2008 or 1998. Startup exits in the next three years will include IPO’s as well as acquisitions. And unlike the last bubble, this bubble’s first wave of IPO’s will be companies showing “real” revenue, profits and … Next Page »

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

Single Page Currently on Page: 1 2 3 previous page

By posting a comment, you agree to our terms and conditions.