Advice from an "incubator"  


I came across this on Fred Wilson's blog. I admit to a caution about VCs based on some of what I saw in London in the dotcom boom and bust but his blog is a good read and I find that I relate to many of his opinions and attitudes. I suppose at heart I'm a liberal capitalist - more or less.

Anyway, although this advice is aimed at the kind of company that incubators take on - start-ups that are expected to grow rapidly and maybe IPO or be bought out, it's also relevant to the enterprises that this blog is focused on - small, personally-run, creative companies that aren't particularly interested in getting huge and corporatised but intending to make a decent living.

Here is the piece in full with my take in blue -

It's counterintuitive, but during an up cycle people accept conventional wisdom, and during a down cycle people challenge it. That's good. Very good. And the cycle will winnow competition.

A lot of what we were told was "true" about market capitalism turned out to be a mirage. It feels like the world turned upside down. Scary, but also thrilling. Now is a great time to think outside the box. NO - in fact, don't even THINK of corporate terms like "outside the box". Think quirky, think outrageous, think of what you dream of. Think "why not?". What we were told was "silly" may not be at all. Think daft and think hopeful.

"Yes we can" Okay, that's a modern cliche now, but you know, there is a whole world shift going on that's about daring to do what you thought was not possible. It's in the air.

And if you need to make cuts, make them now. Don't cut 10% now and then another 10% early next year -- make the change in one fell swoop. Piecemealing your way through change kills momentum, hurts culture and the team and is a chickenshit way to run a business.

Yes, this is just good sound advice. But it's something that's easy to ignore because at difficult times, it's easiest to deny and put off. Personally, here at Baba Studio Headquarters (hold on a second while I move the cat off my desk) we have been cutting swathes through some of our plans and reconsidering others. If something has to go, it should go now.

There will be a flight to quality; this always happens. But this time I think it's going to be more than that. For TV and print this has been an unusual year: The shift to online has been stemmed first by the Olympics and second by the election. But year-over-year growth in ad spend has been down across the board (see slide 32 of the sequoia deck, linked below). Expect the next year to be ugly and different. I think spend will move online, very fast, and print may right downhill. And people will look for ROI -- real measurable results. Monetizing social media is hard. Much to do here, much money/share to make/take.

There will also be a flight to individual and meaningful - and simply gorgeous. And lasting. Especially lasting. Now that might sound totally naive. I know that financially people will rush to quality in monetary terms. Quality like Lehmann's and General Motors and...
See what I mean? In a world where it won't be at all clear what's stable and what's not, there will be a desire for products that don't have that depressing "this looks fine now but it's poor material and poorly made and I know it'll look awful after the first wash" feel that many chain-store items do. People will want something that has some material and emotional quality to it. Small and medium-sized (and micro) businesses are in a much better position to provide this. With authenticity.

Openness. I think this cycle is going to drive another significant shift in how open and interconnected the Web is. This is good news for you, and this is bad news for the Facebooks of the world, who tried to replicate the walled garden strategy of Web 1.0.

Think about what happened through the last cycle. Start with AWS. In the 1990s, Internet companies had to own everything top to tail. Today you can use Amazon and other services to pop up a new box for hundreds of dollars, if that. Thats a huge shift, and it's also a shift towards interdependency.

We are all now dependent on the Amazons of the world for parts of our infrastructure. I think this turn of the cycle is going to drive a lot more openness. This in turn ties to the market figuring out how to rapidly establish bottoms-up standards. This is about working with others and figuring out how to do things without having to do all the work.

As a very small business or start-up, you have to use what's out there. We are looking more and more to building a very good, personal relationship with one or two workshops. Our graphics and printing we do ourselves (how terribly uncorporate of us to be so picky, but the quality of the images and printing is everything to us). But our sewing is being done by a few places that we like and trust.
More broadly, we're using everything out there for blogging, showing off our pictures, building our shops and so on. When you're a very small business, you have great flexibility in trying out all sorts of services quickly and then deciding to run with them or not according to your experiences. Large business has far more trouble with doing this in a meaningful way.

Main piece by John Borthwick.

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