Instead of building fast with lots of servers, lots of customers, and hopes of revenue, many new start-ups--mindful of the recovering economy--are taking a downright old-fashioned approach: make money first, grow later.
Whether that will play out at the Demo conference, which begins in earnest Tuesday in Santa Clara, Calif., is debatable. But in recent months, the buzz-worthy start-ups have had a decidedly more traditional view than Web 2.0 heavyweights like Facebook and Twitter, founded just a few years ago with the principle that you build your audience, then you make your money.
There is, in fact, a shift every few years as start-ups change direction from the fast and loose (though potentially immense) consumer market, to that of businesses large and small. Whichever one is in vogue depends largely on who's doling out the money--be it investors or the end users. For a while, neither of these groups were willing to open up their wallets, forcing many start-ups to go back to the drawing board with their ideas.
Not too much needs to be said here about the merits of a good business-centric Web service; the Web offers the same kind of breakthroughs for a quick start, or cheaper overhead than traditional, in-house solutions. That's obviously an attractive angle for any Web start-up, especially with big contracts that bring the promise of long-term revenue or an exit to a bigger company.
On the flip side are the consumer services--the YouTubes, Facebooks, and the Twitters of the Web world. We know these names because they've reached the very top. Though just like in world of pro sports, there are an endless number of competitors ready to usurp, and that continue to do well, albeit on a slightly lower tier of popularity.
So which side of the fence does a company start out on? And can you change your mind once things get up and running?
In just the last couple of years there have been a number of companies that started out one way and eventually went another. Some might just call this survival, and in that way it's indicative of the environment they must survive in. One good example of that is storage service Box.net, which came onto the scene with a very flashy widget users could place on blogs or Web sites to share files with one another. This was back when companies would send you a press release about such things (note: some still do). Over the years the tool became more focused on its business users to the point where the newest product features almost always begin at the top before eventually trickling down down--its desktop file sync tool being one of the best examples of that.
It's the same story for Ning, which got its start around the same time as Box, though offered up a free DIY social network instead. The service was aimed mostly at users who wanted to create their own social networks with more control both over the look and feel and the feature set than could be found on larger social sites. Additional feature modules could be paid for, which brought extra features. The company went on like this for five years before killing off the free account levels, and requiring that users shell out for a paid plan by default.
Even though these two services are aimed at accomplishing dramatically different things, it's not out of the question to guess that changes were made in light of consumer behavior. More specifically that people won't pay for something unless they have to, whereas businesses view them as an expense.
Such was the case with many of the companies that launched at the last Demo back in March. Those we chose as standouts focused on making business more efficient, or that offered new technologies larger companies could utilize to make their own products better. There were also quite a few that were starting out in the business sector, but that could easily trickle down to be consumer products; things like Venugen's 3D Web conferencing, Nyoombi's TV Webcam, or Exaudios' audio mood detection technology.
There are similar approaches at this week's show. For instance, a company like Profitably, which is debuting its small business analytics tool, shows business trends and offers up suggestions based on data from Intuit's QuickBooks. The same approach could end up working quite well with personal finance software. There's also VoiceBase, which has an add-on product for meetings and phone calls that combines Web storage and search. That could easily end up in an organization tool or part of a larger consumer productivity suite. Finally, there's Zingaya, which offers up a widget that lets someone call your personal phone without revealing your number. Companies like Jaxtr and Google Voice have done this before, but Zingaya is starting out with businesses first.
We'll be on the scene Tuesday and Wednesday highlighting trends and companies with good (and maybe even bad) ideas. Stick around for our coverage and analysis. See also our coverage of Demo Spring, where 65 companies launched products and services.