Design rules! The First US Investors Are Re-orienting Themselves

In the US, it seems like the first investors are starting to critically re-evaluate their approach to online investments. In particular Dave McClure has set up a new fund specifically intended to address this radical change of thinking.

Nowadays it is just a minority of online startups which are also tech startups, and therefore a new competence profile is needed for both founders as well as investors:

That something is fundamentally lacking here has been clear since the advent of the Facebook App and the apparent difficulties that almost all are facing with it. But also outside of Facebook there is a crowd of (internet) startups which are tending just to languish along because not enough priority is placed on intelligent application design.

The composition and presentation of an application are essential!

At Exciting Commerce, application design has been from the get-go a central (albiet seldom attended to) topic. In 2005/2006 we had the first related posts under the title “Exciting Tools”, then later under the heading “Widgets”, “(Facebook) Apps”, “Viral (application) design”, etc.

Sobering observation: it seems that neither founders, developers nor investors can genuinely think in terms of applications/services let alone realize that such thinking is even at all important (see the German post on the several misguided shopping apps for the iPhone, GE/EN).

That makes a useful discussion on the topic practically impossible. And with that, the lack of good application design has increasingly fatal consequences. In 2008 this was tangible when good e-commerce applications increasingly fell into the wrong hands:

• Because investors are in general not very open to innovative applications and business models


• And when they nevertheless invest in innovative ideas, they often impose the founders with consultants and managers who learnt their trade in the internet stone age - and as a result do more damage to the development than good.

How many 2.0 founders caught ideas like the Freemium model from Fred Wilson (who in the meantime has re-thought his ideas for the better)? Payment based services may be suitable in exceptional cases (and in the B2B area). But in the consumer web they are often nothing more than an emergency fix for failed or immature internet applications.

How many companies have stunted their natural growth and have stalled due to a too-early switch to a payment based model, rather than re-engineering their application to make alternative revenue streams possible?

Chris Anderson describes in his book, “Free” (as well as Jeff Jarvis in “What would Google do?”) a cornucopia of alternative approaches to generate revenue in the online world. In essence, the trick is to understand the internet as a medium and create your company as a media service which will attract interest from third parties. And then to convert this interest into a willingness to pay something for the service (take Google as the ultimate example).

In this context, the Supernova Startup Panel with Dave McClure and Slideshare founder Rashmi Sinha is a very worthwhile view. They show how they consciously avoid a knee-jerk freemium model all the while having a very clear picture of how Slideshare is strategically moving in the direction towards generating cash.

We need a better understanding of internet applications!

We especially need applications that have been conceived from the user’s point of view and not just from what is technically possible. An extreme example might be the e-commerce segment, where even now a complete industry is largely defined by a shop system concept. But the problem exists for other segments as well.

Very encouraging is then the current change of heart, as Dave McClure so well formulates with his words “Addictive User Experience” and “Scalable Distribution Methods”. We can apply his plea here wholeheartedly:

"Startups & VCs: Learn How to Design, Market, & Eat Your Own Consumer Internet Dogfood"

Originally posted in German by Jochen Krisch, adapted for excitingcommerce.com by Jason Soo.

Comments

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Hi

Great information in this post and a useful discussion on the topic practically impossible.The lack of good application design has increasingly fatal consequences.