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Ten things learned from the Internet start-up ecosystem

I’m struck that there are some basic things that those of us from the Internet sector just take for granted, and yet sometimes appear to be new ideas to those used to other sectors.

We learn these basics by being founders, being embedded in the start-up and growth ecosystem, taking part in events like Webstock and Gather and by reading sites like Hacker News, books like Lean Start-up and following and understanding stories like Amazon, Apple, Trade Me and Xero.

So without further ado, here are 10 top of mind basics for early stage companies in NZ.

  1. Start with nothing, engage with end users and and build a prototype product, before seeking money from investors. It’s easier to invest when you can see the product and talk to the end users.
  2. Organic Growth is better than paid growth. It allows us to scale up and improve the product, sales and customer service as required, and allows investors to see a track record of growth and a curve ahead.
  3. Products and services need to constantly evolve, based on learning from customers through sales, observation of how they use the product and greater understanding of their unmet needs.
  4. Usability and design is critical as it drives end user delight, and happy end users is what drives lasting revenue. The drive for end user delight should come from the top.
  5. Monthly subscription revenue is one of the best business models, with recurring revenue from loyal customers close behind. It means that you can focus on growing the monthly revenue through product improvements and reducing churn.
  6. IP and technology are generally overrated as a competitive advantage, with companies often worrying about patents and secrecy rather than developing compelling products. The compelling part of a technology is that it is integrated into products that sell.
  7. It’s ok to make losses as you are rapidly growing and increasing market share. Amazon set the standard, as they still makes a loss but is worth $120 billion. They have almost doubled sales in the last two two years to $60 billion and had over $2 billion in free cash flows in 2010 and 2011, down to $395m last year. Their loss was 19 cents per share, and their shares are worth $278 each.
  8. The technology and internet sector is already large in NZ, with 34 ICT companies in NZ earning over $50m, 18 over $100m and the tech sector itself is worth over $23b a year, and third biggest. Above all – it’s growing very quickly.
  9. Great staff and leaders drive the fundamental value of companies.
  10. Get on a plane and sell. Nothing beats getting face to face with customers and stakeholders, and New Zealand based companies are only one flight away from a number of key markets. We are lucky to have the worlds best airline, so use it.