There comes a time in every startup's life when you ask whether your bright idea will be stolen / pillaged / destroyed by a much larger 800–pound gorilla – where all you have effectively done is illustrate the potential of a market, enough at least for the gorilla to decide that he wants to eat, shoot and then possibly leave.
Web 2.0 thus far has been all about community and interaction. If you compare Web 1.0 with what's happening today, the key difference is that commerce is now an everyday activity and is almost a lowest common denominator. Back in the day, it wasn't a given that people would use the web en masse to find and buy products.
Nowadays there are enough people online to create the critical mass needed to support so many different niched, vertical communities, mainly because the base level services needed to support these larger markets (bandwidth, speed, infrastructure) are cheap enough for most people to afford.
So, what this means for the budding entrepreneur, whether they are starting a start-up or developing a new business unit, is that there is a lot more opportunity than there was a few years back.
It seems the stars are aligning more favourably this time, but the playing field has changed and this is something which many people are ignoring.
Today, large corporates are more aware of the size and benefit of the online market space, and so they’re more willing to invest time and resources into online initiatives which may or may not bear fruit. In many ways they’re just like the VCs we see putting together large funds in the US – there are initiatives, where some will fail, but those that make it are going to more than make up for the failures.
The factor that corporates consider the most is the impact of the initiative on the brand, whereas the start-up is looking more at just staying afloat long enough to make it past 18 months. And hopefully make some cash (or figure out a business model) along the way.
Enter AOL and Time Warner, which have both recently announced moves into the online video space. AOL will be launching a new video portal and apparently developer API’s too, while CNN will be launching via Exchange.
This in itself is not all that interesting, since neither you nor I are likely to spend much of our time there. But it does ask the question – what are the startups supposed to do, when the big corporates are getting smart enough to see and then act on trends almost as quickly as the nimble startups are?
My intuition tells me that startups shouldn’t be playing in the same space that large corporates are likely to, unless they have very deep pockets and almost limitless resources.
The bottom line is that very few large corporates are going to be as adventurous and willing to experiment as a start-up could. Case in point is that we’re not likely to see the same content found on YouTube, on AOL or CNN’s video offering.
But that doesn’t really answer the question about how start-ups are supposed to defend themselves from the 800 pound gorilla, even if they are in a niche market…
My guess is that when the 800 pound gorilla sets his sights on you, there isn’t much that you can do unless you’re the keeper of the zoo – perhaps the only thing you can do is hope that he consumes you instead of learning how to become as nimble as you are!
But wait, isn’t that the exit strategy of many start-ups?