|
The first instinct is to write off the consumer market entirely. Investors got burned, so why would anyone be willing to take a flyer on the market anymore? Just look at the evidence: Already venture capitalists and investors are racing away from consumer Web sites and pouring money into other Internet areas: business-to-business services, infrastructure companies, and wireless services. Before you join the pack, though, ponder for just a moment: The herd mentality didn't exactly work out when it came to e-tailing, so why would it deliver something better with B2B services or infrastructure plays? Instead, the emphasis needs to be on understanding what's unique about the companies in each of these markets. Just because money is moving to another industry doesn't mean that every company is going to be innovative. Funding based on trends can blind investors. NEW MINDSET? It's simple to say that cookie-cutter business plans for the consumer market, essentially identical except for the details of a product or industry, are follies of the past. Unfortunately, the excesses and the greed that overran the consumer market could easily be repeated in these new areas and lead to another rash of one-size-fits-all business models. You don't have to look any further than the business exchanges to see how easy it is to fall into that trap. We'd like to think that the past two years of herd-mentality funding were an aberration. Greed and that crazy market made everyone do it with the B2C companies. Now that cash isn't as cheap, the frenzy of funding unremarkable business plans written on napkins won't happen again, right?. Maybe, maybe not. As much as everyone wants to say they're playing by new rules, it's doubtful the new mindset has taken hold as much as people say. Despite the carnage, the one enduring characteristic that developed during the past couple of years is the notion that getting rich quick is a birthright. That expectation took a very short time to develop but will take a very long time to disappear. FLY UNDER THE RADAR. One way to banish the sense of entitlement is to foster patience and focus on real innovation by taking a more thoughtful and gradual approach to building companies. Halsey Minor's story about spending months on his business plan for CNET and working through three drafts before finally ending up with a 120-page opus now seems almost quaint. It should be an exercise more entrepreneurs go through. Smart startups also should take the time and fly under the radar while they work out the kinks. There were examples of innovation in the consumer market during the past couple of years -- like Webvan's plan to create a massive distribution network for home delivery of groceries and other goods. But the rush to go public before these companies had a track record did them -- and investors -- a disservice. The real test of whether venture capitalists and entrepreneurs have learned their lesson will be if consumer startups emerge despite the carnage around them. Founding and funding a consumer company will be an arduous task, full of risk. Should we see it happen, it would signal that VCs and the entrepreneurs had shaken off the herd mentality and were willing to search out creative businesses. Now that would be truly innovative. Green covers the Internet for Business Week in New York. Have a question or a comment? Let her know at heather_green@ebiz.businessweek.com. |
