Six Months Later, Three Start-Ups Find Their Goals Are Elusive
nytimes.com
nytimes.com
The RentingYourHome guy is definitely a start-up and I feel for him as he seems to be hitting all the standard challenges (too little cash, co-founder leaving, trouble getting/keeping customers). This actually seems like it could be a compelling service, but the actual property owners are a hard group to reach (ie: they are not all farting around online all day) and convincing them that they can do it all online feels like a very, very tough task.
Having a website does not change the basic rules of business. These small companies may not be "start-ups", but the lessons still apply: focus, don't overreach, make money fast.
That's a meaningful distinction to make because it involves different skills, a different assumption of risk, and a different level of tenacity needed to be successful in one or the other.
So startup = selling something different. It's about pitching people your idea, and positioning a product creatively in the market. New business is about being seen (e.g. consider starting a franchise pizza shop and advertising on local TV/in print). It's "new" because people didn't know it was there before. But it's not "startup" for lack of its differentiation along the lines of how that something is sold.
I like this defition because it permits that a new company that sells the same old product (e.g. Threadless and their tees) may be called a startup for its ability to creatively position their products.
Exactly when a company transitions from "startup" to "going conern" is another question.
A few more characteristics of a start-up: 1. Technology (often web based) plays the key role in the interaction between the company and it's clients / users. 2. The present market either doesn't exist, or functions in a fundamentally different way before / outside of the startup. 3. The start-up is not as geographically limitted as the new business. That's not to say that a start-up can't be location specific, but if it is, it should be a platform that can be applied to other locations.
And a few characteristics of a new business: 1. A new business, like a say a bakery, is another instance of a proven business that addresses the market in the accepted, historical way. There are many bakeries, they are fundamentally no different from each other. In fact, it's likely one of the oldest professions still still actively being pursued. Each takes raw ingredients and makes baked goods out of them. Each then try to sell them for more than their costs. 2. New businesses are often very location specific and often rely heavily on face to face interaction, or local phone/email interaction to complete transactions. 3. New businesses often rely on physical goods or services for the basis of their offering, where with start-ups technology is often the basis for the interaction.
Selling your new-businesses good via an online store, does not automatically make your new-business a start-up. In the case of the t-shirt entrepenuer and the baker, they are most certainly not start-ups, but just new-businesses trying to do business online.
In short, a start-up is a new business, but a new business is not necessarily a start-up.
This is occurring in both ends of the market from the personal-injury no-win-no-fee farms to the high-end specialist areas e.g. trademark law, intellectual property, copyright law, patents, company law etc.
Initially, outsourced legal may start out as something that sucks (and initially do low-level/menial work), but over time will improve with each iteration/cycle to the point where legal outsourcing in India will be able to match its technology outsourcing model and actually be a viable option for US/UK companies.
For many years I have thought a country like India is very well suited to outsource many service-based models in fields other than I.T. which require little physical asset (i.e. hardware and manufacturing cost) and rely more on intellectual talent and in this respect I think the guy may been on to something with the legal services aspect.
However, as is a common reason for startup failure, his timing may be off. It seems the markets in the US/UK are not ready just yet. Just my $0.0000002.
In fact most of the menial work in many law firms are done by juniors (new graduates) or legal-executives ("executives" being people who have little or no law qualification but are able to do the work).
In my old firm (http://www.lawdit.co.uk), which I setup years ago with my friends, this was and still is the case in many ways.
I have seen the internals of many other leading firms (Allen & Overy, Ashurst, etc.) that also do this.
Hence, regardless of how powerful the legal lobby against an uptake of such outsource practice, I dare say, the bottom-line and almighty dollar will win in many cases.
After all, if you are getting the same/better quality at a lower cost and faster turn-around (3 people working on a task instead of 1) what would you do?
The precedents have already been set in other fields/industries so I expect it will not cause as much furore as one might imagine and will probably start with the thin end of the wedge i.e. no-win-no-fee farms.
Time will tell :)
As an example, for outsourcing of public works projects, a professional engineer (PE) must supervise the project and is ultimately responsible for the project. That is to say, he would lose his license if the project were deemed injurious to the public, etc.
In U.S. we have a few people from Florida Bar who do most U.S. related clients.
Most work undertaken in our U.K. offices with the usual pre/post reviews by the senior legal team/section-head to ensure accuracy, consistency, competency etc. but most of the menial tasks can be done by others.
Everyone gains: juniors acquire skills and experience, seniors save time and can focus on other tasks.
Of course no work is passed until signed off etc. etc.
Legal businesses in U.K. are continously audited by Law Society and other auditors/regulatory bodies so everything conforms to set standards, hence nothing to worry about for clients in these respects etc.
Hope that helps :)
= 416,000/year revenue.
Whole different world, I guess. It's completely possible to have an online business for a few $1000/year in costs. And yet this woman isn't turning a profit yet on nearly 1/2 a million in revenue.
People think you have to be crazy to start a start-up these days. No even close, but you would have to be crazy to start a bakery now!
Her concerns seemed a little strange to me. How is his model fundamentally different from a traditional property management company, or perhaps it's closer to the software companies that support that industry already? Both models are well established. Some Web-based conflation of the two sounds viable to me. He also offers a tenant screening service, which already exists as well.
“His jaunt to India to look for legal assistance is further evidence of his failure to understand the complexities of the legal world he was wading into.”
Where's the complexity? I owned a rental property for a few years, and apart from the initial purchase and subsequent sale, I never needed a lawyer. Of course, you could get sued, but that's hardly routine.
My biggest concern would be that I believe there's already a fair bit of competition in this space, at least for the individual services that he's packaging together.
Another great example of choosing a start-up over more formal education. If all else fails, you got the education anyway.
But one thing that bothers me, shown by this article, is why everyones uninspired first business idea is either selling t-shirts or restaurants? Probably the worst two industries to chose with their low barriers of entry.
Social networks are not very hard to build but depend on a very large scale of users. On the other hand restaurants are more expensive to start and maintain but can survive off a smaller market. Both are saturated with competition and have low margins.