Is the cost of starting a business less than zero?
There has been a well documented and discussed deep decline in the cost to start a technology business over the past ~ 15 years. From the days where every website was custom and each site element was a de novo build to today where virtual servers are easily and cheaply spun up and down and where frameworks exist for just about every feature and functionality that you could imagine building, the cost of starting a tech business has gone from $5-$10M to maybe $50k or less. It’s a remarkable trend and one of several key factors driving the Democratization of Entrepreneurship.
But is it possible that the cost of starting a tech business has fallen to less than zero? In some cases I think this is now the case. It’s now possible for entrepreneurs to seed ideas into the market and get people to put their money where their mouths are before even laying down a line of code. And this trend is true perhaps even more powerfully on a product level from existing companies.
We recently announced our investment in LeadPages – a platform that allows publishers to quickly create and host lead and conversion pages. The company actually started by selling the product that it was thinking of building, rather than building it first. Co-founder Clay Collins put out the idea for the LeadPages product on his marketing blog and before they had even scoped the project had $40k of pre-orders (paid pre-orders). With that money he built the beginnings of what became LeadPages.
Also in the Foundry portfolio BetaBrand is doing the same thing on a product level through its ThinkTank initiative. The idea is pretty simple – customers “vote” on new product ideas by agreeing to buy them. The ideas that get enough support get made.
Browse Dragon, KickStarter or Indigogo and you’ll see lots of examples of this (not every crowdfunded project fits this but many do) – show your support for something and if we reach a certain threshold, we’ll create it for you.
Another great example of a company taking advantage of this trend is Filament. It’s ThinkTank for web apps. As they describe it: “We show you a vision of a Web app. Your votes determine whether we build it, and its features.” Exactly what I’m talking about.
I think this trend is incredibly powerful. And we’re just at the start of it. Just as we’ve seen the control of IT systems become decentralized across organizations of all sizes, I think we’ll also see a similar decentralization of the product ideation and development process. And while not every product and innovation can be developed in this way, many many can, should and will.
I’d love your thoughts on this as well as other examples of companies getting creative about pre-sales.