Entrepreneurs interested in starting high-tech businesses, don't fret! Admittedly, the year has been difficult for many dotcom start-ups that launched with fanfare and publicity but didn't haul in the dollars they expected. Many new business ideas were tested--everything from targeted content sites to B2B exchanges--but few were able to execute.
Believe it or not, though, it's still possible to grow a business on the Web, using keen business sense and judicious money management. Let's put the past behind us and move forward, with five next-generation high-tech businesses you can start today.
The Basics: OK, so it's not sexy. But selling products and services to Uncle Sam online is something better than sexy--it's lucrative.
As local, state and federal agencies enter the ranks of online shoppers, a new crop of Internet companies is springing up to supply them with everything from staples to software.
Background Required: You need military or e-commerce experience, or a little of both. Of course, if you don't have either skill but hire people who do, Uncle Sam may still want you.
Who: Brad Allen, 44, co-founder, chair and CEO (co-founded with Keith Allen, 35, and Mark Dowd, 40)
What: eFederal Systems Inc. , Washington, DC
When It Started: the Fourth of July, 2000
What It Does: provides software applications and professional services for buyers and suppliers in the government market
Why It Rocks: The 20-person company has found a fail-safe market. As Brad points out, "Governments spend more than $500 billion annually and almost never go out of business."
"Business-to-government companies target fewer buyers that have enormous purchasing power and more dependable shopping lists," says Brad.
billion: amount estimated to be spent on e-government (including hardware, software, and internal and external services) in 2005
He should know. His eFederal Store, an online store designed specifically for government agencies, sells more than 100,000 different office supplies and computer products and lets agencies purchase those items using government-issued credit cards. His other company, eFederal B2G Workplace, allows government agencies to track purchase card usage, select from a variety of vendors, and analyze their own audit trails and strategic spending.
But it takes more than a few good men to tap this market-it takes experience. Brad and his co-founders had the right stuff: Brad had some e-commerce experience--he sold his first online company, a golf shop called Buygolf.com , in late 1999--and his brother Keith, now vice president of sales and marketing, had previously sold computer hardware to the government. Dowd, now vice president of operations, had military experience and had worked for Booz-Allen & Hamilton, a government consulting firm.
Before enlisting in this type of business, be aware of the downsides. For example, stringent bidding rules, technological limitations and cautious attitudes may discourage government buyers from using start-up e-tailers for their purchases. And analysts say the public sector has moved more slowly into online buying than businesses or consumers have--for several reasons, including Y2K-bug fixes that drained the technology budgets of government agencies for several years. Even now, just 35 percent of local agencies operate their own Web sites.
Moreover, the e-government sector may be out of reach for many start-ups, because it takes years to master the intricacies of the market and requires continuing investments just to understand the government's needs. And, as anyone who's contracted with the government knows, the long sales cycle in the public sector translates into a long wait before achieving a return on investment.
But if you're successful, rest assured that Uncle Sam probably won't be going out of business anytime soon.
The Basics: Why would you want to get into a market that's already been invaded by several industry leaders and plenty of start-ups? Because the opportunities have only just begun to boom. E-learning is the hot service among organizations seeking to train employees and improve financial performance. Web-enabled courses can range from specific training about companies' core competencies to generic topics like management.
Background Required: An educational or high-tech background is important if you want to start a successful e-learning company, but the most significant factors that lead to success are business experience, management skills and the ability to offer quality customer service. If you make your first priority hiring a quality team of employees with educational or high-tech backgrounds, you've learned your lesson well.
Who: Jonathan Estes, 39, CEO (co-founded with Vance Remick, 58, and David Hadden, 36, president)
What: New Course Inc. , Chapel Hill, North Carolina
When It Started: 1996
What It Does:
provides educational services to help companies transition from face-to-face training to
Why It Rocks: With 20 employees, New Course Inc. continues to grow steadily.
"Online learning allows a company to train a whole group of people on a computer, instead of having them sit in a class with an instructor. They can log on anywhere, 24 hours a day, seven days a week, to participate," says Estes. "Companies aren't limited by distance, space or time with e-learning."
billion: 2003 sales in the e-learning market
SOURCE: The Yankee Group
Estes acknowledges that hundreds of players, including five or six large, well-funded companies, are already playing the game, but he says that plenty of "unique technology is still wide open."
Estes is currently developing a software product called ProCourse that helps customers get the most from training by identifying employees' skills-development needs and providing access to training resources. Estes claims the product will cut employee training time and the attrition rates for fast-growing companies.
Another way to differentiate yourself: Many existing companies are coming at the market "from a high-technology perspective, but they're leaving education behind," says Estes. "However, if someone comes at this space with a strong education component, where adult learning principles are applied to the e-learning level, he or she will rise to the top."
The Basics: Welcome to the world of wireless: Many start-ups are gaping at the sheer size of the wireless market and jumping in to sell products and services to the many, many wireless product and service users.
A popular start-up choice: wireless ASPs. These companies usually make their money by letting customers communicate via any and all of their wireless devices anytime, anywhere.
Background Required: Obviously, it's crucial to have some experience in the wireless space--or hire people who do-to run a competitive start-up in this area.
Sanjoy Malik, 42,
co-founder, president and CEO (co-founded with Jay Chaudhry, founder and chair)
What: Air2Web Inc. , Atlanta
When It Started: 1999
What It Does: helps companies deliver enterprise applications such as ERP and CRM solutions to their customers and employees via any digital device
Why It Rocks: Already employing 185 workers, this company has snagged 30 to 50 large customers, including CBS SportsLine.com and UPS.
million plus: estimated number of people per month who will use mobile commerce services in 2005
Malik, a pioneer in the mobile technology field, created Air2Web because he saw the future, and it was wireless. "Mobile devices were becoming more sophisticated when I started, so I knew there was a great need for applications to help people use their devices in more compelling ways than, say, just as a phone," he says.
Malik considers the most important factor for success "a business idea that will ultimately be a money-making endeavor, as opposed to just an innovative idea."
For the entrepreneurs who come across such ideas, the opportunities should only get bigger. "A year or two from now," predicts Malik, "every company will be wireless."
The Basics: Wireless ASPs aren't the only ASPs in the sea. In fact, ASPs in general, which deliver and manage application and computer services from remote data centers for multiple users via the Internet or private networks, are a quickly growing field that's like honey to high-tech entrepreneurs.
Why is this market growing so quickly? According to the ASP Industry Consortium, ASPs offer customers multiple benefits, like sparing them from having to procure and implement complex systems themselves. ASPs also provide financial flexibility and reduced risk. And with no capital expenditure on software, hardware and IT technology, organizations can test new technology with minimal impact in their existing environment.
Background Required: Stephen Lane, a research director of the Aberdeen Group, says you should have a technology background to start an ASP, "because, after all, you're acting like somebody's IT department. You're their CIO or director of operations."
Who: Andrew Feinberg, 30, co-founder
What: NetCracker Technology Corp. , Waltham, Massachusetts
When It Started: 1999
What It Does: offers network inventory management solutions through an ASP model
Why It Rocks: It's already grown to about 150 employees and should add another 100 workers by year-end.
billion: estimated ASP revenues by 2003 in a market set to increase fivefold by 2003
SOURCE: Current Analysis
Feinberg says more companies are outsourcing services in ASPs today for one simple reason: necessity. "Companies lack the resources to build and support technology in-house," he says. "They realize that, to stay cutting-edge, they have to deal with outsourced vendors."
Feinberg adds that cost is another significant motivator for potential clients, as outsourcing "is quite often significantly less expensive in the long-term."
Feinberg is already looking beyond the company's current growth, propelled by its in-house solutions, to all the future opportunities provided by the ASP model, which he considers significant. "We're now dealing with large customers," he says, "but there's a great market in the midsize range, and we plan to aggressively target those companies this year and in the following years."
Human Search Engine
And now for something totally different . . . we couldn't resist throwing in this dark-horse idea, because, frankly, it's something we're dying to use.
Here's how it works: For a small fee, customers can call a human search engine company's 800 number to help them find information they need from the Web, whether it's directions to the DaimlerChrysler building for a lost cab driver, how much caffeine a certain product contains or who designed a gown they saw on the Emmys. It's not hard to see that plenty of people would forsake a cumbersome Internet search for this more convenient service.
One company has a jump-start on offering this . . . and benefiting from it, too. INetNow, a Los Angeles-based human "voice portal" company, has grown considerably since opening its doors in late 1999--it started with three employees, now has 55 and, by the end of the year, should employ more than 400 people.
"Many of us depend on information from the Internet every day. When we leave our desks and don't have access to the information, we want it," says Michael Evans, 35, iNetNow vice president of marketing and communications. "And our company delivers it."
Melissa Campanelli is Entrepreneur's "Net Profits" and "Net Sales" columnist.