I know we've seriously beaten this dead horse, but where is the line between "new business" and "start-up" these days. It would seem to me that everything is being called a "start-up", when in fact, many are just new businesses. I would not call either the bakery or the t-shirt company a start-up, as they are not using technology to take a novel approach to an existing market (or create a new market), nor is the technology really that central to what they are trying to do. One is hoping to set up an online store (hard in the "specialty / gourmet" food world) and the other is trying to market a t-shirt line. These are new businesses, not start-ups (by my definition).
The RentingYourHome guy is definitely a start-up and I feel for him as he seems to be hitting all the standard challenges (too little cash, co-founder leaving, trouble getting/keeping customers). This actually seems like it could be a compelling service, but the actual property owners are a hard group to reach (ie: they are not all farting around online all day) and convincing them that they can do it all online feels like a very, very tough task.
Nevertheless, the only one of the three that is even approaching success is the bakery. The one traditional "startup" (rentingyourhome) does sound like every other internet entrepreneur -- in a bad way. His idea sounds like it has serious structural deficiencies, and now he's hiring indian lawyers to make up for the slack. Brilliant. Perhaps these structural deficiencies are the reason he's having the "standard challenges" to which you refer.
Having a website does not change the basic rules of business. These small companies may not be "start-ups", but the lessons still apply: focus, don't overreach, make money fast.
Apologies for my ignorance, but is there a link to the extended distinction between startup and new business? I don't quite see how the two are all that distinct, or why the distinction is useful?
It's been my take that "startup" connotes something entrepreneurial, where "new business" (or "small business") connotes the start of something that's been done before.
That's a meaningful distinction to make because it involves different skills, a different assumption of risk, and a different level of tenacity needed to be successful in one or the other.
So startup = selling something different. It's about pitching people your idea, and positioning a product creatively in the market. New business is about being seen (e.g. consider starting a franchise pizza shop and advertising on local TV/in print). It's "new" because people didn't know it was there before. But it's not "startup" for lack of its differentiation along the lines of how that something is sold.
I like this defition because it permits that a new company that sells the same old product (e.g. Threadless and their tees) may be called a startup for its ability to creatively position their products.
Exactly when a company transitions from "startup" to "going conern" is another question.
A few more characteristics of a start-up:
1. Technology (often web based) plays the key role in the interaction between the company and it's clients / users.
2. The present market either doesn't exist, or functions in a fundamentally different way before / outside of the startup.
3. The start-up is not as geographically limitted as the new business. That's not to say that a start-up can't be location specific, but if it is, it should be a platform that can be applied to other locations.
And a few characteristics of a new business:
1. A new business, like a say a bakery, is another instance of a proven business that addresses the market in the accepted, historical way. There are many bakeries, they are fundamentally no different from each other. In fact, it's likely one of the oldest professions still still actively being pursued. Each takes raw ingredients and makes baked goods out of them. Each then try to sell them for more than their costs.
2. New businesses are often very location specific and often rely heavily on face to face interaction, or local phone/email interaction to complete transactions.
3. New businesses often rely on physical goods or services for the basis of their offering, where with start-ups technology is often the basis for the interaction.
Selling your new-businesses good via an online store, does not automatically make your new-business a start-up. In the case of the t-shirt entrepenuer and the baker, they are most certainly not start-ups, but just new-businesses trying to do business online.
In short, a start-up is a new business, but a new business is not necessarily a start-up.
Many universities and organisations in India are gearing towards outsourcing legal talent based on UK/US law and it seems only a matter of time before we see a boom in this area.
This is occurring in both ends of the market from the personal-injury no-win-no-fee farms to the high-end specialist areas e.g. trademark law, intellectual property, copyright law, patents, company law etc.
Initially, outsourced legal may start out as something that sucks (and initially do low-level/menial work), but over time will improve with each iteration/cycle to the point where legal outsourcing in India will be able to match its technology outsourcing model and actually be a viable option for US/UK companies.
For many years I have thought a country like India is very well suited to outsource many service-based models in fields other than I.T. which require little physical asset (i.e. hardware and manufacturing cost) and rely more on intellectual talent and in this respect I think the guy may been on to something with the legal services aspect.
However, as is a common reason for startup failure, his timing may be off. It seems the markets in the US/UK are not ready just yet. Just my $0.0000002.
That's an interesting point. Are there legal impediments in place that prevent such outsourcing? I don't know the law on this. The American Bar Association is a very power organization, with the added detail that their members also happen to write the laws in this country.
Not that I know of. In the US/UK you need to be a member of the bar/law-society to practice as a lawyer/solicitor (i.e. represent clients) but there is no reason why the actual work itself cannot be outsourced.
In fact most of the menial work in many law firms are done by juniors (new graduates) or legal-executives ("executives" being people who have little or no law qualification but are able to do the work).
In my old firm (http://www.lawdit.co.uk), which I setup years ago with my friends, this was and still is the case in many ways.
I have seen the internals of many other leading firms (Allen & Overy, Ashurst, etc.) that also do this.
Hence, regardless of how powerful the legal lobby against an uptake of such outsource practice, I dare say, the bottom-line and almighty dollar will win in many cases.
After all, if you are getting the same/better quality at a lower cost and faster turn-around (3 people working on a task instead of 1) what would you do?
The precedents have already been set in other fields/industries so I expect it will not cause as much furore as one might imagine and will probably start with the thin end of the wedge i.e. no-win-no-fee farms.
Is a bar-member lawyer responsible for supervising the outsourced work? Can he be disbarred if something is done improperly?
As an example, for outsourcing of public works projects, a professional engineer (PE) must supervise the project and is ultimately responsible for the project. That is to say, he would lose his license if the project were deemed injurious to the public, etc.
Yes. Possibly, depends on what is done and went wrong.
In U.S. we have a few people from Florida Bar who do most U.S. related clients.
Most work undertaken in our U.K. offices with the usual pre/post reviews by the senior legal team/section-head to ensure accuracy, consistency, competency etc. but most of the menial tasks can be done by others.
Everyone gains: juniors acquire skills and experience, seniors save time and can focus on other tasks.
Of course no work is passed until signed off etc. etc.
Legal businesses in U.K. are continously audited by Law Society and other auditors/regulatory bodies so everything conforms to set standards, hence nothing to worry about for clients in these respects etc.
Whatever happens, Mr. Foley added, “she’ll have gained a better business education than she could at the Culinary Institute of America and the Harvard Business School combined.”
Another great example of choosing a start-up over more formal education. If all else fails, you got the education anyway.
She'll have gained a greater knowledge on how to run a fledging small business. A degree from Harvard Business School would put her in a much better position for a high-growth starting job at a large company. Big difference. As much as this place likes to avoid the reality, the fact is that most businesses eventually need pure business types to efficiently run the company. They may not be involved in strategic planning, product development, etc. (although many are) but you need those operations people to keep the wheels turning efficiently.
I couldn't agree with that more. College has a great social life and allows you to mature. But starting a site on the side tought me more then 3 years of school.
But one thing that bothers me, shown by this article, is why everyones uninspired first business idea is either selling t-shirts or restaurants? Probably the worst two industries to chose with their low barriers of entry.
Yeah, I've come to realize that most ad supported social sites are very high risk.
Social networks are not very hard to build but depend on a very large scale of users. On the other hand restaurants are more expensive to start and maintain but can survive off a smaller market. Both are saturated with competition and have low margins.
Restaurants have a far higher barrier of entry: interior design, inventory management, supply chain, quality control, staffing, just to name a few headaches. That's not even calling into question your competence (assuming you are the chief operator).
Barriers to entry includes more then start-up costs. A restaurant can open up on a busy street and advertise in local newspapers to get a sustainable customer base. The marketing and PR costs for a social network are much much higher. They would need at least 100,000 users to A) provide value as a social network and B) make revenue from PPC ads.
"... Janet Portman, a lawyer and an expert in landlord-tenant law ... said her doubts about the viability of Mr. Takle’s business model remain."
Her concerns seemed a little strange to me. How is his model fundamentally different from a traditional property management company, or perhaps it's closer to the software companies that support that industry already? Both models are well established. Some Web-based conflation of the two sounds viable to me. He also offers a tenant screening service, which already exists as well.
“His jaunt to India to look for legal assistance is further evidence of his failure to understand the complexities of the legal world he was wading into.”
Where's the complexity? I owned a rental property for a few years, and apart from the initial purchase and subsequent sale, I never needed a lawyer. Of course, you could get sued, but that's hardly routine.
My biggest concern would be that I believe there's already a fair bit of competition in this space, at least for the individual services that he's packaging together.
She has built her cafe to $8,000 in revenue a week
= 416,000/year revenue.
Whole different world, I guess. It's completely possible to have an online business for a few $1000/year in costs. And yet this woman isn't turning a profit yet on nearly 1/2 a million in revenue.
Yes, but it's also a lot harder to charge money for an online business, especially a consumer-facing one. Nobody expects to get a muffin for free, but they expect Facebook to be free even if they use AdBlock.
I found this interesting, too. Margins should be huge in the cafe business, right? So it must be rent and employees that are costing her so much. I still would have expected a cafe to be profitable with that kind of revenue.
Margins are not huge for this sort of business. This am on NPR they were talking with a baker who said that his flour costs had tripled in the past year, his egg costs had doubled, and all of his supplies now had "fuel surcharges" tacked on. While margins might have been comfortable in the past, they certainly aren't now. These folks are between a rock and a hard place and have had to absorb much of these costs in their margins.
People think you have to be crazy to start a start-up these days. No even close, but you would have to be crazy to start a bakery now!
The RentingYourHome guy is definitely a start-up and I feel for him as he seems to be hitting all the standard challenges (too little cash, co-founder leaving, trouble getting/keeping customers). This actually seems like it could be a compelling service, but the actual property owners are a hard group to reach (ie: they are not all farting around online all day) and convincing them that they can do it all online feels like a very, very tough task.