What to Look For In 2009…or What Companies Will Survive the Coming “Economic Storm”

In recent weeks, we have seen a ton of commentary from people we hold in extremely high regard when it comes to managing and running successful startups or businesses. Jason Calacanis seemed to be the first to tip with this, and then we had this, this, this, and the one I made our whole team read, this. Then even more recently, Mr. Paul Graham startup guru himself wrote this. If you haven’t read all of those posts, we can summarize them for you…Stop spending money in this downturn.

However, there is more to a successful business than just not spending money and this type of solution seems to be the fundamental problem with startups, businesses, and our economy in general. Everyone is just used to spending lots of money, so surely their thoughts on how to MAKE money or become successful is to just spend less.

Unfortunately, I have not seen one post about focusing on where money (actual revenue) will be made. So the thinking looks like this “jeez, we may not be able to raise another $6 million when this funding dries up, let’s spend less.” However, what everyone needs to be looking at is “WHERE AND HOW DO WE MAKE MONEY?”. [Disclosure: In 1999, I was a nineteen year old CEO who burned through $1.2 million in VC money. I too am guilty, and learned the hard way.]

In light of all this, the following are the companies and industries we expect to be successful in the coming years. We often get asked career advice and looking within the right industries is always a great start. Also, internally these are the categories in which we are looking to explore joint ventures with the market leaders. The short version goes like this:

The Internet companies that will be successful over the next two years will:
a) Help people/businesses make money
b) Help people/businesses save money
c) Help people/businesses access money

That’s it, there is no more to it than that. Please note, money also =time or =improved efficiency because in most cases there is a net dollar value to that time or efficiency.

The long term trend we are banking on is what 37signals called the Fortune 5 million, what we call the Fortune 25 million, and Freshbooks has now upped the ante to the Fortune 50 million. Basically, that small to medium enterprises will become the new force in the global economy. Regardless of the title, the new revolution will be based on smaller, tighter organizations solving micro problems. There are massive forces at play here which we will discuss at a later date but for now, our big bet is that the trend is going to be towards more people working for themselves. Seth Godin said it back in 2005 that “small is the new big” and Albert Wengner commented that “Small (500 employees) is the new large”.

The Facebook widgets, online video social networking, and blah, blah, blah, will all be put on hold to solve the more immediate need of recognizing that the only thing that can be profitable is to provide ACTUAL value to our economy and to invidiuals. We heard it first on a conference call with Executive Director of OpenID Bill Washburn (on our board of advisers) who hit the nail on the head when he said the next phase of the Internet will be based on being able to facilitate “high level transactions”. John Battelle calls it “Web meets world” and Hank Williams started saying the exact same thing calling it the “money making web”.

If you are not working at a company that provides one of the three mentioned services above, you should leave and find one that does. If you ARE working at a company that helps people/businesses make, save, or access money we want to talk to you.

Here’s a more detailed outline about which specific sites (and trends) to look out for:

1)Companies that help people/businesses make money
Obviously the biggest way to help people make money is to find them a job. Overall, the online job market works but it’s like saying the credit market worked. The job sites that exist are going to have to find better ways to pinpoint talent. While in the past all they had to do was to throw as many people at each other and see what sticks, we believe there will be a flight to quality. Businesses will not be looking to waste time interviewing and talking with every candidate and there will be A LOT of candidates for most positions.

Even more important than traditional job finding sites are going to be the ones that think outside the box and match talent anywhere in the world with the businesses who need them most. This is not a new notion but one that is simply going to explode over the next few years and I’m not talking about low-wage, low-talent outsourcing to India. I’m talking about a guy in Fort Wayne, Indiana who is a great coder and wants to work for a company in NYC (as @jerry does for us!) but likes his lifestyle, working from home, and being able to read to his kids while we are still at the office.

Websites like odesk.com, elance.com, topcoder.com all need to think about how to take advantage of the extreme need for matching up talent with businesses that need to be more efficient in their hiring and projects. The core problem with these sites to date though has been the inability to really trust those that you are hiring and making sure projects hit their targets. It will be interesting to see how they overcome that. In the past, some of these freelance sites have been a free for all.

Additionally, websites and tools like Freshbooks, Basecamp (37signals), Google Sites, etc. are going to be the lifeblood of this new economy. This new workforce is going to need low cost tools to manage their work and is not going to pay enterprise type dollars to do so.

2)Companies that help people/businesses save money
If your business can help people save money on something that they are already purchasing, you should be well off. I’ll give you a great example. Our new favorite website, CrowdSpring.com. We spent about a month after raising our funding meeting with branding companies all of whom wanted somewhere between 25K-100K to work on our branding. We found Crowdspring and for $600, we had 150 logo and branding submissions, none of which we had to pay for until we chose the exact logo we wanted. Talk about a steal! The expensive branding companies will have their time and place for us, but for now that is a huge savings. Websites like Crowdspring that help people make money and also businesses save money are EXACTLY the new, innovative models, that are going to be home runs in the next two years.

Then there are websites like Mint.com (congratulations to Aaron Patzer and his team who just keep killing it) and Wesabe.com (have to mention our NYC brethren) which are no brainers for helping people to get a handle on their finances. In fact, we even use these tools ourselves to get a good picture on where we are spending our money as a company.

One business I would love to see is one that could streamline (aka save money on) the lead generation/conversion process. There just has to be a better way than using Google Adwords to generate sales online. The leads that Adwords generate are junk and we’ve already started to write it out of our acquisition strategy. Would love to see some companies who have a refreshing view on matching buyers and sellers of services. Naturally, they would have to help businesses lower their CPA (Cost per acquisition) or improve ROI (Return on Investment) at the same time. Looks like I’m not the only one interested in this, but we wouldn’t spend $495 for a “report” :).

3)Companies that help people/businesses access money

Of all the three, if I was not on the BeenVerified team and was thinking of a new startup, helping people/businesses access money would be the number one theme I would be working on. Through partnerships, we believe BeenVerified (or something like it) is a key ingredient in the next phase of money lending, but I would want to get my hands even deeper into the process.

The last two weeks have created a TRUE paradigm shift when it comes to lending and receiving capital. This is one of the oldest and most profitable industries of all-time and lending capital will not simply end. People and businesses will always need money and when there is interest to be charged, capital will find a way to be lent out. Right now is the time to POUNCE on new business models and new mechanisms for thinking about how capital is efficiently distributed. The old model is not just broken but has officially BLOWN UP and will never be seen again. This is one of the greatest times in history for entrepreneurs positioned to take advantage of opportunities that haven’t been seen in years. The Internet (really, technology though) has the potential to truly change the face of capital distribution.

Last week we met with our friends from Vidoop, who like BeenVerified are a security ingredient in these new processes and who were in town for a conference called Finovate. Finovate is a conference built for companies to present interesting solutions to a wide range of finance problems. Peer to Peer lending companies such as Prosper.com, Zopa.com, LendingClub.com (currently on hiatus) and many others may be one way to solve the credit crisis. The question is, as always “Will this scale”?, but I believe there is a massive opportunity here for P2P lending or even other approaches that have not even been thought of yet. Maybe it’s something more like OnDeckCapital.com, who knows? But it will be something.  The current crises will tip our hands to forcing us to find new solutions and to be honest, although it might not seem so right now…it will be for the BETTER.

If you are working on solutions to any of the above problems, keep your head down and keep working hard. As I type this, my girlfriend is watching an Oprah special (Tivo’d) on managing and saving money. While politicians are going to be making things worse and spending MORE money to solve the wrong problems, take comfort in the fact that long after this “crisis” has passed and the economy rebounds, it will be rebounding specifically because of the innovations that YOU are working on and the vision of the future that you helped shape.

Never before have we had an opportunity to truly redefine each and every single industry. The status quo has been so far knocked down that this is the opening we wait our whole lives for. Forget “exit strategy” and think “profit, profit, profit”. Be relentless in your pursuit of profit (although not in that dangerous subprime mortgage type of way).

This is exactly the type of opportunity that entrepreneurs salivate over. Now go kick some ass and call us if you want us to join you.

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