More Advice for Entrepreneurs: Get Big Cheap

Picking up on the theme of Joey's last post, Bessemer Venture Partners' VC David Cowan has put together his own advice for entrepreneurs today. After listing some of the factors affecting the marketplace he concludes:

And so the winning recipe today for aspiring entrepreneurs is GET BIG CHEAP. Don’t waste expensive development on untested ideas, and don’t let a fat marketing budget mask a weak value proposition. If instead you tinker your way to scalable organic growth, you’ll have a valuable business on your hands. Don’t worry about how long it takes—just make sure your burn rate is low enough to accommodate several cycles of iteration.

But today, entrepreneurs have the opportunity to launch web sites so rapidly into a market that adopts technology so quickly, that with some iterative tweaking and feedback from users they can test their ideas in months, and on a shoestring budget. Without the need for capital, they needn’t sport a proven track record of success, and so many many more ideas can be tested, and the winners can come out of nowhere, from anywhere on earth. With the right user experience, the best innovations can attract 50 million users in their first year of general availability, as proven by Skype, Firefox, Wikipedia, YouTube and MySpace.

To which I'd add that a lot of the infrastructure you need to scale to 50 million users is much cheaper today than it was even five years ago; everything from bandwidth to CPU to storage. And innovative services like EC2 and S3 (for computing and storage) are letting companies avoid tedious tasks like integrating and managing platforms, and the expense of buying 50 million users-worth of infrastructure when you're only starting out.

Just take a look at how SmugMug's taken advantage of the S3 storage service to save and scale, all at the same time:

  • Total amount NOT spent over the last 7 months: $423,686
  • Total amount spent on S3: $84,255.25
  • Total savings: $339,430.75
  • That works out to $48,490 / month, which is $581,881 per year. Remember, though, our rate of growth is high, so over the remaining 5 months, the monthly savings will be even greater.
  • These are real, hard numbers after using S3 for 7 months, not our projections. They closely match (but are actually slightly better) than our projections.

I expect our savings from Amazon S3 to be well over $1M in 2007, maybe as high as $2M.

It's a great environment for entrepreneurs (and a challenging one for large VC funds).


Tags: , , , , S3