The hardest part of embarking on a consumer Internet startup here in New England is finding wealthy veins of talent to mine out of big companies that provide relevant experience sets. From my non-technical entrepreneur friends I often hear about how hard it is to find class-A engineers that know “web stuff,” and we ourselves at Tabblo had a very hard time finding good direct marketing talent that understood how factors like viral adoption could be weaved into a coherent user acquisition plan. Both skills can be learned by those who are really talented, but this takes time and discipline— something is hard to cultivate…
2. Thanks to the more conservative nature of investors here, ventures in the consumer Internet space often fall prey to the business equivalent of premature optimization, favoring getting to revenue at the expense of adequate distribution (users) or product refinement. I don’t know that I would go so far as to espouse the Y-Combinator idea that you just need to “make something users want” and everything else will take care of itself— in fact if you’ve taken venture capital and are expected to deliver venture returns, it is irresponsible not to understand what the path to positive cashflow is, and to be testing the key assumptions at every step of the way. But an over-emphasis on this can lead to a dangerous situation where amidst slower growth than expected (which happens to just about every startup I’ve known at some point), the management team gets distracted by the “monetization problem” just to focus on something that might in the short-term appear to be more directly controllable. And when you’ve got a board of investors that encourage this trap, things can get ugly quickly.
Incidentally, the VC fund which we raised our money from at Tabblo, Matrix Partners, and our board member David Skok were A+ at helping us to avoid this trap. David was always pushing us to focus on solving the distribution problem at the cost of prematurely optimizing a business which would not at that point not have been at scale. Revenue is important, as is understanding the drivers of the business, but I’ve seen way too many entrepreneurs prepare for board meetings replete with spreadsheets and powerpoints that are more fitting of HP’s printer business than of a rag-tag bunch trying to find a market with their product.
Both of these shortcomings can together create a vicious downward cycle that takes anyone who is not sitting on top of a golden egg idea down quickly.
But best of all, the best thing about starting a company that will eventually need regular users to scale (which is the case with all consumer Internet businesses) is that we are much less subject to the echo chamber effect of the Valley. In the Valley everyone is twittering, sharing links on Delicious, digging articles left and right, and uploading pictures to Flickr from their super phones, but the rest of the country is really not quite ready for a lot of these applications. And the sad part is that most of the companies that I’ve seen started appear to be aping a lot of these initial Web 2.0 experiments instead of trying to think about how to move the adoption curve back into the mainstream.