July 1st, 2008
A few weeks ago I wrote a post about the difficult times that tech startups are having in the industry today. Reading through the post, I realized there was a key point that I forgot to make. Whether or not your company is a services business, a technology play or a media company:
If you aren’t generating revenue, it’s time to re-evaluate your business.
There is so much VC money out there these days (although word on the street is it’s drying up!), that it’s easy to forgo initial revenue and start building & scaling a business in a void without having hard cash paying customers. Here’s the thing — you should be able to prove your technology quickly and with minimal investment… if you can’t, you’re overthinking either your product or overestimating the requirements of your clients. In fact, with the right contacts you can probably sell a 20-line PHP script as a “pixel server” — at least to a network or agency that desperately needs to have “behavioral technology” for the next big agency deal.
Of course the script won’t scale, and it probably won’t work as a standalone product for multiple customers which means you’ll have to rewrite it and hire some real engineering talent to turn it into a packageable product. But if you have an idea — build a POC quickly, get yourself a customer, prove there’s interest and start generating revenue! Doesn’t matter if it’s adserver, behavioral tracking, a new media network — each idea has a revenue-generating “quick win” you can close to prove the business works. Right Media was a profitable for over a year before it launched the exchange. A single good CPA deal with AOL funded most of the first year of the company!
And it’s not just about the revenue. Real customers provide real data, real feedback and real stats about scalability & performance — invaluable feedback & information that will help you build a better and ultimately more competitive final product and/or service offering.
I’m not saying you have to be profitable (although if you’re a pure media company you better have a damn good reason not to be). There is definitely an argument to be made that investing in engineering today will pay off in revenues later, but that does not give you an excuse to develop in a void hoping that your product will be a smash hit.
If you’re not making money now, chances are you won’t make any later either.
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