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October 19, 2003

Startup rules are changing

Ross Mayfield, the founder of SocialText and serial entrepreneur talks about how the rules of bootstrapping has changed:

- Our business model is antithetical to traditional enterprise software. Top-down software, with lines of code as barriers to entry, process and ontology that users are expected to fit themselves into, long sales-cycles and inordinate TCO -- is by all accounts dead and leaves users stranded with email.

- The reason for this is the rules and opportunties have changed. You can't screw your customers. You can't lock them in. You can't ask them to take significant risk up front. Risk is shared with customers by providing incremental proof of value in-line with them taking risk on you.

- While startup costs have declined, some have increased. Notably, its harder to sell traditionally (top-down) and you can't raise barriers to entry by locking-in your customers. The only entry point is bottom-up. The only marketable barrier to entry today is network effects.

- The business model shares risk with customers, provides software as service, provides trial and open source options, maps to security requirements, is priced in-line with value, grows organically and above all, meets user needs without false constraints.

October 19, 2003 in Entrepreneurship | Permalink


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