Startups

Some say that we are in an information bubble, startups which have no business model/revenue are getting funded on the order of hundreds of millions of dollars. Others say that startups are fueling innovation and creating value and they are the new model of doing business. I do not take either side. There is some hype but one cannot deny the innovation and new ideas being implemented as a result.

Lets take a look at a few startups that have been in the news and try to predict about their success/failure. I will come back to this post an year later to see if any of my predictions turn out to be correct:

1. AirBnB: This site allows you to rent room in your house to potential visitors. They have over 50000 potential listings and 20 million connections and have recently raised 7.8 million dollars in funding. The site is decent, provides good value and already has a good userbase in US atleast. Will be in business an year later.

2. Rovio: A gaming company which has created the famous game: Angry Birds. Recently received $42 million in Series A funding and has 4.2 million dollar profit in second half of 2010. Although, Angry Birds is a great game; but it is very hard to replicate success in gaming industry again. Also, they are not providing any value apart from letting users kill their time. So a question mark from my side and angry birds looks like a temporary phenomena. Maybe they will still be doing strong business next year, if they are able to replicate angry birds.

3. Flipkart: An indian Amazon site which provides great experience and cash on delivery. It has taken only one round of funding of about 10 million dollars and has a revenue of 20 million for year 2010-11. It is growing very fast and provides a huge value to customers. I believe this will be a strong success one year later as well.

4. Tumblr: An easy blogging site which provides easy blogging and is more like a cross between Facebook pages and Wordpress/Blogger blog hosting websites. Do not think that this provides any additional value over what is already present. It got a funding of 30 million dollars with no revenue model whatsoever. Should be a failure unless it adapts.

5. StackOverflow: This is a programmer Q&A website. They have expanded to build other communities as well. They do not have a great revenue model but provide tremendous amount of value not being provided by any other company in this domain. This site should keep on working and expanding their business. They have received 18 million dollars in two rounds of funding till now.

So for me, a startup even if it doesn't have a revenue model, should create enough value for its customers to be a successful one.