Web 2.0 startup company popular small line

Small is the popular small line of startup companies in the U.S. Web 2.0

Author: CNET Technology Information Network Translation: Li Hai

CNETNews.com.cn AM

CNET technology news February 8 International report Jason Fried, president of 37 Signals is a great software entrepreneur. But he doesn't want to start a software company in the traditional mode.

Without trying to squeeze into the complex and expensive product business market, Fried and his comrades chose a relatively eccentric software: host-based personal organizer and project management applications.

For Fried, the old-fashioned mode of relying on customers to make a lot of dollars for operation has become old.

"I think the idea of enterprise software is dead," Fried said. Enterprise software is a dirty world-big and useless things have never worked, and they can never be placed on time for customers, and they are too expensive ."

Although the pace of development has slowed down over the past few years, the enterprise software market is still an industry worth billions of dollars, and it is still growing. Some investors and entrepreneurs say that the ever-changing industry makes it hard to break into the market.

"Investors are getting less excited about enterprise software," said Mark Hildenbrand of Onset Ventures. There is no doubt that it is a challenging area ."

In contrast, over the past two years, small companies are emerging in large numbers. They develop network-based applications or open-source software, which are sometimes called Web2.0 companies.

Many of them can take off with relatively small-scale cutting-edge investments, rather than the past hundred billion dollars.

For example, 37 Signals's business plan is to build simple, host-based applications and charge registration fees to small businesses or individuals on a monthly basis.

Since the launch of its first service for more than two years, the self-funding start-up company has earned hundreds of customers, and it has no debt. The company also successfully funded the open source Web development project Ruby on Rails.

"You can use the Internet to build great and small products, and you can get 1 million or 0.5 million users," Fried said ."

Entrepreneurs and investors said a series of technological changes have made it possible for very specialized products to survive. Most of the changes are host-based applications that are constantly evolving and popularized, or service-based software.

The founding people of the network Word Processor Company Upstartle initially considered developing collaboration and file management software for the enterprise intranet, but they finally gave up the idea, and decided to focus on word processors on the Internet.

"In the past, you had to do a huge thing-something like a suite," says clardia Carpenter, one of the founders of Writely. Now, it seems that you can do something lightweight ."

Since the Internet has become an application platform, Writely can connect its word processor service with other network services, such as network logs or photo sharing websites. Today, many websites constantly publish their application interfaces (APIS), which allow users and developers to share information between different host services.

Another important technological advancement is the rise of AJAX (Asynchronous JavaScript + XML. This is a development technology for creating interactive graphical user interfaces (GUI) and Web pages. It can automatically refresh data on network servers.

With AJAX, programmers can develop host-based versions of desktop applications, such as file and photo Publishing. AJAX can provide users with similar user experience on PCs.

In addition to focusing on specialized products, these startups are able to take off with little money compared to the past.

Open-source software provided freely is growing, and the price of powerful hardware servers is getting lower and lower. Five years ago, new startups may have to spend tens of thousands of dollars to buy these hardware devices.

The operation cost has also become quite low. Taking 37 Signals as an example, the company did not spend any money on marketing. They adopted online marketing methods, such as word-of-mouth publicity of online logs. The seven-person company has no sales staff.

David Rose, managing director of angel investment in new york, said: "The Web we see is a movement of profound changes in software companies ."

Rose said that in just one year, network entrepreneurs can change their concepts to functional products with just $0.5 million. "If we put it in the past, it would take several years, millions of dollars, and many planned modifications to wait until the first product was released," he said ."

Richard Forman, managing director of the RDF venture capital, believes that the network-based software model can radiate both individual and enterprise markets.

"The beauty of Web 2.0 is that it is a two-pronged model," he said. On the one hand, you have the content submitted by the user, which is a huge opportunity for the network. On the other hand, you have the network services for collaborative work and application service providers, it will have a real impact on the Enterprise World."

Currently, salesforce.com, netsuite, and SAP are all advocating that enterprise customers are hoping to abandon large software projects and choose host-based services. Even the kingdom of Microsoft's software world has made similar comments.

The low threshold for entering the Web 2.0 world makes those novel ideas easily converted into new startups. Some analysts said that the threshold may be too low.

Many Web 2.0 network applications can be completed by a few people, with a relatively small investment and time. At the same time, however, investors believe that these services are easily replicated.

In addition, some Web 2.0 companies have not fully tested their business models. For example, writely is still being tested, and the company is still evaluating several different revenue models, such as customer registration and advertising models. (Edit: Sun Ying)

Small is beautiful for Web 2.0 start-ups

By Martin lamonica
Staff writer, CNET News.com

Published: February 6, 2006, 4: 00 am PST
Jason Fried, president of start-up 37 Signals, is a bona fide software entrepreneur. But he wants nothing to do with the traditional model of starting a software company.
Rather than try to crack into the business market with a complicated, pricey product, Fried and his colleagues chose to stake out a fairly narrow sliver of the software world: hosted personal organizers and project management applications.

To Fried, the old way of doing things -- where a start-up's success hinges on a few well-heeled MERs willing to shell out big dollars -- is history.

"I think the idea of enterprise software is dead. enterprise software is kind of a dirty word -- big bulky things that never work, were never delivered on time, and are too expensive, "Fried said.

The enterprise software market is a multi-billion dollar industry that's still growing -- albeit more slowly than in years past. but changing industry dynamics are making it a less attractive market to try to break into, say some investors and entrepreneurs.

"Investors are less excited about the tough sledding of that (enterprise software) business model," said Mark Hildenbrand, general partner for enterprise applications and infrastructure software at Onset Ventures. "There's no question that it's a challenged area."

Instead, the past two years has seen a proliferation of smaller companies building Web-based applications, sometimes referred to as Web 2.0, as well as open-source companies. summary of these firms can get off the ground with relatively small up-front investments, not the tens of millions of dollars that venture capitalists pumped into new software ventures in years past.

The business plan at 37 Signals, for example, is to build simple hosted applications and charge a monthly submodules into small businesses and individuals.

In the two years since launching its first service, the self-funded company has signed on hundreds of thousands of MERs and it has no debt, said Fried. it has also founded a successful open-source Web development project, Ruby on Rails.

"You can build a great business on a niche product because with the Internet, you can reach a million or a half-million people," said Fried.

Sharp focus, wide angle
A number of technology changes are making very focused product offerings more viable, according to entrepreneurs and investors. Most significant is the growing popularity of hosted applications, or software delivered as a service.

The founders of upstartle, which makes an online word processor, writely, first considered building collaboration and document management software for each ate intranets. but they eventually scrapped that idea and decided to focus on word processing over the Internet.

"In the past, you had to do a huge, overwhelming thing -- a suite of stuff. now it seems like you can do a lightweight part, which wo'd ve seemed like a feature before, that can be stitched together with something else, "said writely co-founder cldia Carpenter.

Because the "Internet has become an application platform," writely can connect its word processor service to other web services, such as blogs or photo-sharing sites, carpenter said. web sites are increasingly publishing APIs, or application programming interfaces, which let users and developers share information between different hosted services.

Another important technical advance is the emergence of AJAX a development technique for creating interactive GUIs and Web pages that can refresh Web server data automatically. with AJAX, programmers can build hosted versions of desktop applications, such as document and photo publishing, which offer a user experience similar to PC-bound applications.

In addition to pursuing a narrow product focus, new companies can get off the ground with significantly less money than a few years ago, according to entrepreneurs and investors.

Freely available open-source software is becoming increasingly robust and powerful hardware servers are relatively cheap. five years ago, start-ups wowould have had to spend tens or hundreds of thousands of dollars for equivalent products.

Operating costs can be lower as well. 37 Signals, for example, has not spent money on marketing, relying instead on viral marketing techniques, like blogs and word-of-mouth advertising from its MERs, said Fried. the company of seven employees has no sales people.

"What we're seeing with Web 2.0 is that the game of what a software company is and how it gets started has very much changed," said David Rose, board member of New York Angels, which is an angel investment organization that recently launched a practice for Web 2.0 companies.

Rose said Web entrepreneurs nowadays can go from idea to functional product in under a year with under a half-million dollars in investment. "It used to take multiple years, millions of bucks and years of top-down planning to get the first product out," he said.

The Web-based software model applies to both the consumer and the business market, said Richard Forman, managing ctor of RDF Ventures and a member of New York Angels.

"The fascinating thing about Web 2.0 is that it's a double-barreled track. on the one hand, you have user-submitted content which is a sea change for the Web and then you have Web services for collaborative interaction and ASPs (application service providers ), which will have a real impact on the enterprise world, "he said.

Companies such as Salesforce.com, NetSuite and now SAP have demonstrated that specified ate MERs are willing to forgo large-scale internal software projects in favor of hosted services, at least for some select applications, analysts noted. even Microsoft, king of the shrink-wrapped software market, has taken notice.

Calling on the Fortune 5 million

A lower barrier to entry makes it easy for new ideas to turn into fledgling businesses. Maybe too easy, some analysts said.

When Web 2.0 online applications can be put together with just a few people and relatively little upfront money and time. But by the same token, those services can be easily replicated, according to investors.

Also, some business models for Web 2.0 companies are not fully tested. writely, for example, is still in beta and evaluating several different revenue models, including subscriptions for certain customer segments and, potentially, advertising.

"We're seeing a proliferation of start-ups, generation of which may be nice little businesses that will be beneficial to the Founders, but few that have the fundamental ingredients for creating lasting, meaningful businesses, "said onset ventures 'hildenbrand.

Although building enterprise software companies may be tougher, money continues to flow into the field. But companies may pursue newer strategies, such as open-source or hosted applications.

Onset's Hildenbrand, for example is focusing on companies that have deep expertise in a special technical area, such as mobile devices or RFID. he's seeking technology that does more than automate a set of business processes at global 2000 deployments.

"That's now pretty darn easy to do and hence the value proposition of doing it is not nearly as strong," Hildenbrand said.

But for entrepreneurs like 37Signals 'fried, that's a row not worth hoeing any more. And, he contends, keeping his business operation small and his product simple doesn' t mean making sacriices.

"I think we can be one of the most meaningful companies in the next 20 years," he said. "We don't care about the Fortune 500 -- it's the 'fortune 5 million' -- the small businesses that are doing interesting things."