October 27, 2007
Free falling costs and website funding
The trend towards small, efficient startups like Menuism, 37Signals, and the Robot Co-op and a host of other small, unfunded or minimally funded startups is forcing venture capitalists to scrounge for non-traditional investments (halfway down the page).
ALTERNATIVE INVESTMENTS The blog VentureBeat has been following the venture capitalists scrounging for alternatives to technology investments as free-falling costs have drastically cut the need for outside financing. This week, Eric Eldon noted that Kleiner Perkins took part in a $50 million investment in YesPPG, a shirt factory in Shanghai (venturebeat.com).
There is no doubt that it takes money to start a company (although it doesn’t take much for a web-site!), but one has to wonder if it really takes $20 million+ to provide an outstanding experience to consumers like our massively funded competitors seem to believe.
October 29th, 2007 at 9:44 am
Hey Galen,
Great comments. I am constantly amazed how cheaply you can start a web business these days and how many costs have plummeted.
If you remember back to September 2005, Trulia.com launched with a team of 6 people, no silicon valley venture capital in a shared office space. As you say yourself, it doesn’t make much to build a website. We built the first version of Trulia on a shoestring, fueled with diet coke and pizza!
However, to build a category leading media company in an Industry as large and complicated as real estate you need more investment. Building customer service, sales, design, development, QA, finance, marketing teams takes time, capital and resources. Working with Sequoia Capital and Accel Partners has helped us to build the solid foundations.
The trick is in timing. Build the foundations too late and you have scaling problems, build them too early and you limit your options, build in unnecessary costs and probably invest in the some of the wrong things as the business constantly evolves and changes.
Speak soon
Pete
October 29th, 2007 at 10:47 am
Thanks for stopping by, Pete. That wasn’t supposed to be a dig at Trulia per se, but at all of our massively funded competition. And don’t get me wrong, you all have done some cool stuff with the money.
I guess I subscribe to a 37Signals / Paul Graham approach to building a company; a little money goes a long way and sometimes the strings that come with large sums of money actually result in stomping on the gas pedal with the car (plane?!) pointed in the wrong direction (see #13 http://www.paulgraham.com/startupmistakes.html ).
In the past few years we in the tech world have seen spectacular successes built on relatively modest investments, spectacular successes built on enormous investments, but the spectacular failures, companies that raised an enormous amount of capital before proving any success in the market are particularly memorable to me.
See #11 in that essay to (quite likely) describe Estately.