Reality Check

Keep It Traditional Yet Up-To-Date

Perception:You need the best, hippest technology to succeed on the Net.

Reality: Don't believe it, warns Michael Binko, 30-year-old co-founder and vice president of LaunchFuel Inc., a Reston, Virginia, Net start-up accelerator. "Even though technology is a tremendous enabler, blind faith will quickly drain precious resources," says Binko. What's even worse, a lot of bleeding-edge technology isn't ready for primetime: "Entrepreneurs need experienced guidance to understand which technologies are proven and which are merely hype."

Perception: Traditional business/operation metrics don't apply to me.

Reality: Once upon a time (admittedly not long ago), netpreneurs insisted that yardsticks such as profitability and revenue had no relevance to a Net start-up, and investors believed them. No more. "That's from the Internet's Wild West days," says Binko. Patience with start-ups is now very short, and, at an early stage, companies have got to start producing operational numbers that show the business has long-range potential-or impatient investors just may turn off the life support.

Perception:E-commerce has to cost big bucks.

Reality: Do it smart, and it can be done on the cheap. "When we created e-Holster.com in 1999, it only cost the company about $5,000 out-of-pocket," says serial entrepreneur Tom Traeger. "I created an 'earn-in' relationship with our webmaster, who maintains the site as part of his 'sweat equity.' We are now generating approximately $1,000 per day."

Perception: My idea is unique, and I have no competitors because I'm using the Net to accelerate my business plan.

Reality: These entrepreneurs need a wake-up call-fast," Binko concludes. "Although the Internet certainly does allow a first-mover entrepreneur the opportunity to change an industry under the feet of established larger competitors, he/she can rest assured that a handful of like-minded entrepreneurs are kicking the tires on the same concept. The harsh reality is that the Internet-the same medium that offers first-mover advantages-also helps subsequent competitors that may be able to take market share if the entrepreneur missteps."

The only cure is to keep striving to improve. While that prescription may sound tough, in this age, continuous improvement is the only protection.

Perception:All the good Web niches have been taken; there's no more room for start-ups.

Reality: New Web sites sprout every day, and in just about no categories are there real leaders with insurmountable leads. Amazon.com would be tough to dislodge from its hold on books-but try naming other category leaders with similarly strong positions. It's tough to think of any. What's more, many established e-companies are now showing all the signs of artery-hardening that made the brick-and-mortars easy prey. Everywhere, companies are setting up legal departments and doing all the stuff that shouts bureaucracy. The more they do that, the more they're like dinosaurs marching closer to their own funerals-and the greater the reason for optimism among start-up entrepreneurs.

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This article was originally published in the September 2000 print edition of Entrepreneur with the headline: Reality Check.

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