Internet Startups – Something for Entrepreneurs to Consider

by Jim on May 28, 2010

I just put this up on Startup Coast, but thought I would put it over here also,

Many times when I am listening to a pitch for a new Internet or Social Media company, the entrepreneur attempts to categorize their company as another YouTube or Facebook. Now it is entirely possible that this may be true, but it is highly unlikely. More importantly, using companies like YouTube or Facebook create an impression of the type of story we should be listening to hear.

I thought it might be interesting to look at YouTube for the type of story they were able to tell. First, they were created in February 2005 and officially launched in November of 2005. They had their first public beta in July 2006 at which point they were getting 65,000 new videos per day and by January 2009 they had about 6 Billion videos. They estimate they now upload 24 hours of video every minute of every day.

Back in 2005, their story was something radical but apparently believable to Sequoia Capital who invested $11.5M shortly after their launch in November 2005. I remember seeing Chad Hurley on stage at the June, 2006 Always On Stamford event where he was asked what his business model is and he said they hadn’t figured it out quite yet.  Google announced a $1.65B offer for the company two months later.

My point is that over a very short period of time, about 19 months, they went from creation to acquisition with a huge payoff, but clearly had some meteoric results to back up their story. They could demonstrate their growth even though they couldn’t tell you they planned to make money. Their service was up and running and delivering results!

So, if you want to make a pitch that your startup is on track to be the next YouTube, remember to show that your service is up and running and bring in the results that shows your ability to be the next YouTube. That’s what they did.

As I have said many times, investors look for reasons to say NO and positioning oneself as the next YouTube without a compelling story of exactly how this is going to happen, gets me to NO fast.

As a side, YouTube is currently the third most visited site on the Internet behind Google and Facebook and is the second most popular search engine behind their parent Google.

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