Looks like Meebo and Reddit are being cast as the El Mariachi of the startup world. Hits that got made largely outside of the "studio system" for an almost mythically low amount of money. The $7,000, financed on credit cards movie became something of an archetype following Rodriguez' success. The Times is doing their best to establish the same mythology in the technology world:
In the last couple of years, hundreds of other Internet start-up companies in Silicon Valley and elsewhere have followed a similar trajectory. Unlike most companies formed during the first Internet boom, which were built on costly technology and marketing budgets, many of the current crop of Internet start-ups have gone from zero to 60 on a shoestring.
Some have gone without venture capital altogether or have raised far smaller sums than venture investors would have liked. Many were sold for millions before venture capitalists could even get in. That has been a challenge for venture capitalists, who have raised record amounts in recent years and need places to put that money to work.
“V.C.’s hate it; they want you to take big money,” said Jay Adelson, who is the chief executive of two start-ups, Digg and Revision3. Digg took some venture money, but far less than backers offered, and Revision3 has been running on about $850,000 raised from a group of angel investors.
Won't somebody please think of the venture capitalists?
The article is right in that it takes a lot less to get an online business off the ground these days. A lot of the expensive infrastructure built out of the telecom boom (bandwidth, data center capacity) is available for much less than it initially was being sold for. Combine that with rich free (as in speech and beer) and open platforms, languages, and development toolkits, and a better understanding of how to turn HTML and JavaScript into a real application UI, and you can deliver real software but as a service.
Scaling up won't even impose the same costs it has. Imagine building the next Meebo not on rented servers, but out of virtual appliances deployed on something like Amazon.com's Elastic Compute Cloud (EC2) and Simple Storage Service (S3). You get to leverage Amazon.com's buying power and management efficiencies, and you don't have to scale in advance of your worst-case-scenario capacity forecasts.
Even so, don't expect to see your favorite general partners tapdancing by the highway for nickles any time soon. Besides not knowing of any VCs who can tapdance, a company still needs serious money to serve a global audience, particularly if it wants to get to that level quickly. Bootstrapping and cadging together angel money is a slow process. Moreover, the low barriers to starting up a company mean that there's just that much more noise in the market. Breaking free of the crowd is an expensive proposition, and a few million bucks wouldn't hurt.
So, while starting your technology company has gotten cheaper, it certainly hasn't gotten any easier. Nor has it become magically inexpensive to grow your company for the long run. Rember, once the studios discovered El Mariachi, the $7,000 wonder, they spent several times that amount on print transfers (from 16mm to 35mm, if you must know). Without that later stage, larger scale investment, nobody would have seen the movie.
Tags: Meebo, Reddit, startups, VC, El Mariachi, Amazon.com, EC2, S3