Bonus Anil Dash Interview: Why Blog When You Can Tweet? (2009)
Anil Dash is a very smart man who's done well in tech and web business. He's also a hip hop fan, in case you didn't know.
He's got a great post up about why and how small time operators don't have to buy into the traditional limits of so-called "lifestyle businesses" aka businesses that can make the operators a healthy living without requiring big investors who will expect huge returns on their investments.
Here's a chunk of what he has to say on the topic:
"One of the reasons that lifestyle startups have had to avoid scaling too large is because resource constraints limited either the total size of reachable audience, or the richness of the interactivity that could be supported for a user base. For example, running a site with an enormous user database used to require a significant up-front investment in servers, databases, load balancers, and even simple physical infrastructure like contracts to power providers and hosting facilities. Those costs followed a stair-step pattern where each subsequent round of growth was followed by a huge required outlay of dollars..."
"The fundamental economics of reaching a large audience don't work that way today, though. Cloud computing, more efficient infrastructure, and delivery as a service offerings change the math, particularly by not requiring large up-front investments. If your community takes off and you're built with a contemporary architecture, you can scale your costs along with income. This has some implications which are subtle but profound:"
- "Being able to succeed with slower growth means you can respect your community members by not having to have an onrush of too many new users at once. Preserving a site's culture is good for the whole web."
- "Lifestyle businesses have much more flexibility in revenue models, often being able to combine membership, advertising and merchandising into enough money to pay the bills. Gradual growth lets the entrepreneur experiment with these different models instead of having to shake down the community all at once through a paywall or intrusive ads."
- "Not having to face the looming threat of a precipitous increase in infrastructure costs lets the startup's founder stay focused on product and community, instead of splitting time between keeping the site running in an environment it's about to outgrow and pounding the streets looking for money."
- "The single biggest value that investors would offer other than money itself was connection to a network of established entrepreneurs that could help the startup survive. But if you're building a web startup today and don't already have a network, there's probably little hope for your startup anyway. Your business is predicated on having the resource that you used to have to rely on others to provide."
See what I mean about being really smart? Check Anil's blog for more.