LOS ANGELES–A unique idea, lightning-fast growth and market dominance, and key talent acquisition are among the keys to getting venture capital and succeeding as an Internet startup, said Ann Winblad, founding partner, Hummer Winblad Venture Partners, in a speech to DMA net.Marketing Conference and Exhibition attendees here yesterday.
“Everyone entering is in a race [that isn't necessarily about money],” she said in a keynote that didn't include the subject of profits until it came up in a question from the audience.
“There is a lot of [venture capital] money out there. And some of that money, frankly, is not smart money” said Winblad. As a result, there are a lot nonsensical start-ups polluting the waters for other entrepreneurs.
Therefore, a truly unique idea is one key to success. “A lot of rule breakers have [already] come before you,” she said adding “wild ideas are open for funding.” She also said the “portal” business is finished.
Market dominance entails a plan for reach and “stickiness,” said Winblad. An entrepreneur must have a plan to “touch as many pieces or people as possible” through organic growth and networking, and a plan to “enhance user loyalty.”
But attaining the growth and keeping customers loyal is not enough. Handling the resulting traffic — or scalability — is also crucial.
“Almost every Internet company has hit the wall with their architecture,” she said. “What if you go from zero to 5 million hits in one month?”
Other keys to Internet success: build an explainable business model and hire great people.
And one of the first great people to go after is a chief financial officer. “Most companies that end up being road kill on the information superhighway didn't have a great CFO,” said Winblad. “Numbers aren't strategy, but numbers will tell you if you've got a strategy,” said Winblad.
She recounted a company that the numbers revealed was paying more than $700 to acquire each customer.
Talent acquisition also entails setting aside at least 15 percent of a company's stock for employee options, Winblad said. “This is an industry driven by options [which] is great because we're all on the same page.”
Though Winblad did not predict when profits will become an issue for Internet companies, she said she doesn't believe the Internet stock bubble is in imminent danger of bursting. “[However] I think some planes might fall out of the sky,” she said.
As for everybody's favorite not-profitable company Amazon.com, Winblad said “they are in the driver's seat in reach, efficiency and customer loyalty.”