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I really enjoyed presenting and learning at Web 2.0. If they put on an event like this again next year you really need to be there. This was a good week for everyone involved (especially for our pals at Flickr who seem to be the deserved darlings of the internet these days).
Thanks to Jeffrey Veen, Jason Kottke and Marc Canter for allowing me to be part of their panels (although Marc certainly did most of the talking, as he usually does ;). And, special thanks to John Battelle for inviting me to speak.
Now, the hot themes at Web 2.0 were open APIs, RSS, and Wikis (and to some extent “the power of the tail,” which is what I believe Web 2.0 is really all about). Some cool tools were announced including Rojo and Jot. I suspect there will be a lot more coming around the bend. Our fellow Chicagoans at Feedburner got some high profile shoutouts as well. Bill Gurley’s presentation blew me away.
But, I’ve gotta say, it felt a lot like 1999 again (and the only people who benefitted from that near future were the short sellers). Tons of VCs floating around. Tons of talk about Round A and Round B funding. The word “millions” was overheard in more conversations than was comfortable. Looks like the overhang is eager to spread itself. Too many smiles and not enough skepticism. “Revolutionary” and “next generation” were tossed around carelessly (as Jason alluded to). But, it is exciting seeing the industry regain some footing and start innovating again. Innovation is alive and that is a great thing.
This all brings me to the point of my post.
I keep hearing about “scaling” issues. Will this scale? Will that scale? Our software is scalable. Etc. But there’s another kind of scaling — human scaling. And that’s the expensive kind. A lot of these new companies that are springing up already have 10, 15, 20 people on board (or are headed there soon). Those are big payrolls for companies generating little to no revenue. And when you have little to no revenue and you have 10, 15, 20 people on board, you have to start borrowing. And when you start borrowing you start going into debt. And when you start going into debt, you can’t continue to innovate or take chances. And then decisions are made that aren’t in the best interest of your customers. It’s a slippery slope. A slippery downward slope.
Aren’t big payrolls and large head counts Web 1.0? Nothing is worse for a start-up than big fat fixed costs. They are like trying to sprint with 50 lb ankle weights. Isn’t Web 2.0 in a large part about agility and flexibility?
So, my advice to these new companies with their new products and fresh-faced enthusiasm… Keep it small. Start small and stay small. Borrow from yourself before you borrow from someone else. You can have an impact with just a few people. You can build great products with a small team. You can do it on your own. You can.
I know you can because we are (and we’re not special). We built Basecamp in four months with 2.5 full timers (and our .5 is 7 time zones away). Our customers don’t seem to mind our small team (and isn’t Web 2.0 about making sure they’re happy?). We’ve been pretty tight lipped about sharing numbers, but in half a year we’ve seen tens of thousands people in over 40 countries make Basecamp a part of their day. And while the product continues to grow, we haven’t had to add a single person to our team. I don’t need to tell you how that affects profit margins. And all this is on top of running our consulting business. That was one of the goals from day one: Build a product that doesn’t require organizational scaling. And so far so good. If you want to learn more about how we did it, attend the next Building of Basecamp Workshop (San Francisco, Hotel Monaco, November 9, 2004).
It requires steady discipline, but it can be done. It is being done. And I believe you’ll make better decisions and build a better product if you drape yourself with a few constraints — a small team and your own money being two of them.
Good luck to everyone in Web 2.0.