KEY POINTS:
The online space has changed the world. We now talk about 'democracy of the internet', 'the online world', and 'communities of interest'.
Your world can be as big or as small as you want. But beware of potential weaknesses in areas like privacy, user churn, IP protection, and monetisation.
We know the successes: Amazon, Google, Yahoo, eBay, SKYPE, MySpace, Facebook, Wikipedia etc. but the failures are largely silent.
The 'community' angle has become the buzzword of strategic and financial investors recently. Why?
The leading thinkers, consumer internet gurus and strategists speak about the disintegration of the internet and the shift towards smaller, richer (potentially more valuable) communities of interest. These communities assemble themselves around relevant information and content (Web 2.0 and 3.0). This trend - starting with social networking - has progressed to more tangible networking - real transactions and exchanges that involve real property.
When I consider involvement in an internet proposition, I look for the following key aspects:
# propositions answering a demonstrated need
# unlocking market potential and differentiation
# simplicity and elegance with a strong line of logic
# the ability to test the 'big idea' cheaply and efficiently
# being naturally positioned to be 'pulled' into the market
# leveraging New Zealand's innovation capability
# possessing the ability to scale massively
The art is building an online business by cheaply and efficiently encouraging a community of interest to assemble itself around relevant content/products/services. This requires a strength of vision and commitment that isn't about ego - it's about openness, a willingness to listen to that particular community and developing business in alignment with its needs. Help the community build your business.
The business characteristics I look for?
# Identifying achievable milestones - each must represent important proof points
# Taking a considered approach
# Allowing time to let the traffic profile build to a point of stability/reliability
# Maintaining a high degree of flexibility - leave yourself open to configure to market responses
# Watching for that first key vertical - acting quickly to lock it in and test its power when it appears.
# The opportunity to develop multiple revenue streams
# A realistic baseline burn rate - enabling enough time for good things to happen
# The ability to test and develop from New Zealand
Valuing an online community business is also an art. It's a matter of drawing together key data points and then making an evaluation around near/medium/long term potential:
# Who is the proposition's peer group? How are these companies valued?
# What's the market potential?
# Is the proposition ahead of the wave or riding it?
# Will a need to scale impact the business structure/resourcing requirements?
# How near is the point of sustainability?
# Is it growing fast enough?
# Do you like the people?
# The usual metrics - traffic/conversion rates/registered users etc.
Somewhere is a meeting point between 'actuality' and 'potential' - ideally where you want to end up. A deal should be positive and focused on building future value.
- START-UP TV
