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Archive for January, 2009

It’s all about the question of “who is going to pay for whom and why?”. Consider this when building a new Internet start-up. It applies independent whether you’re planning to build just one service, make an exit and do something else or whether you’re planning to build an emporium to conquer the world. 

“Who” is going to pay for something you are offering?   “A free service” does not mean (at least should not!) there is not some other (possible non-obvious) party who actually pays for the service you’re offering. And it is not the investors I mean here:-) This can be tricky of course. For example, if you are offering  a service where consumer can find a good doctor, who should pay? Is it the consumer who wants to find a doctor (who will charge the patient), is it the doctor who will get a new customer or is it a third party advertising during the process?  I think this is a no-brainer but there are example services who are doing it “wrong” way. 

“Whom” is the payment going to be done? As an entrepreneur, it should be of course you (your company) who should be a receiving party in this financial transaction. The question still remains why would they pay you? What is the value you’re offering? If you facilitate a service which helps somebody to find a good “doer” for a specific task at home, you should get money for the match-making activity. That’s your value added, right?

“Why” do people pay money for something? Is it for a real-world object (like a book from Amazon), real-world service (like pre-paid ticket), service in the Internet (like extra storage space at flickr.com) or something even more virtual (enhancements in secondlife.com)? There is a research paper on this subject by Vili Lehdonvirta and referenced by a blog entry by Lightspeed Venture Partners on this subject. 

In my latest start-up (tikitagi.fi – currently in Finnish only) people can find reliable doers for their home as well as build a skill profile for services they want to sell themselves. Buying services would be typically for tasks they cannot, don’t want to or have no time for to do on their own. Using tikitagi service is free (for all the basic features) but any doer serious about his/her business would upgrade to premium services including services such as True Identity, Enhanced Visibility and Priority Leads.

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There is a interesting blog entry by Perfect Business writing about How Your Startup Affects Your Body.

It claims that startupping affects a person in many ways (click all that apply!) :

  1. Your energy level rises
  2. Your endurance increases
  3. You become extremely motivated
  4. Ideas come to you more easily
  5. You gain focus
  6. You eat less
  7. You sleep fewer hours
  8. You lose weight
  9. You can’t keep your mind off of your work

I must say I agree with all other points except #6 and #7. I don’t eat less and I dont’ sleep less but I guess both of these are healthy.

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Most web sites use pseudonyms for identifying the user. This makes sense in many cases where it is more important to allow freedom of speech and anonymity instead of exposing who the person really is.

On the other hand, in many services it makes more sense to use the real name of the user. For example, in Facebook you use your real name. It makes sense, how would you otherwise recognize who your friends are? Of course it is really easy to fake a name in Facebook, but that’s another story.

There are many other services which currently use pseudonyms even though I think they actually should use real user names, or True Identity as I call it. For example any site where you are supposed to hire somebody to do a task for you, for example to clean your house. Do you really trust a person behind the pseudonym if you have no way to make sure who he or she is until you meet the person? These services typically say this is the way to offer privacy for the user. In a way that’s true, but maybe the whole concept should still be other way around?

Using the real name of the person does not mean it has to visible for whole world. It could be visible only for the registered users, others would only see for example the first name. Using real names creates more trust between the users and minimizes risk for misuse or for example inappropriate feedback. Giving unjustified feedback, for example, behind a pseudonym is quite easy and calls for resolution processes to be used by the service provider. Using your real name, on the other hand, means that you would not do anything that you would not do in the real world.

How do you prove then that the name given is the real name of the person? Luckily there are number of emerging new services which help you to certify person’s real name. For example NorthID from Finland and myid.is from France offer or are planning to offer such services. A web site using real names of the users can tell all the other users that the real identity of a person is known, even in cases where it is not automatically shown for the others. This kind of electronic certificate can be shown for example only when the a transaction is to be completed and it’s time to check the ID’s.

I see many other uses for services using True Identity, certified by a trustful third party and integrated to a service that all the users feel confident and safe.

Do you agree?

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I think this year (2009) is going to be an excellent opportunity for anyone who has recently started (or is about to start) a new company.

The reasoning behind this is

  • It’s the recession; your business idea might be more thoroughly thought as times are tougher (or at least it should be)
  • You might also focus more on thinking who’s gonna pay for whom and why (btw: don’t count on the advertising business model)
  • You might have few friends who might lose their “steady” job in a big corporation; it might be easier than ever to get co-founders
  • In any case it’s going to be easier to find qualified people for more down-to-earth salary level (the law of supply and demand)
  • Getting funding is tougher and valuations lower than they used to be; but maybe the remaining funding is given to better concepts?
  • There is going to be less competition on the market as some of the companies with high burn rate are going to disappear; more room for new startups

It’s going to be interesting how many great new ideas are going to be successful in the next two years. It could also of course be that the customer behaviour has changed; or is about to change. So forget also copying and “improving” an idea you have seen somewhere else – now it’s time to innovate new ideas. Maybe getting everything out of the recession is going to be a fun exercice, we’ll see!

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