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Why Web 2.0 Startups Ignore Small Businesses (Inside the TechCrunch and Demo Conferences)
09.26.2007
The past two weeks have seen two of the very best conferences for new Web 2.0 startups -- TechCrunch 40 and http://www.demo.com/conferences/demofall07.php 2007.

These events have basically become match-up services: startups meet venture capitalists and the press/bloggers meet the "next-big-thing." Neither of these exchanges necessarily mean the products and services these Web 2.0 startups will be useful or successful -- although that depends on your definition of success.

If success means registering tons of users, driving millions of page views and getting your VC cash and aligning yourself for an acquisition -- then at least some of these startups will succeed.

But if it means providing products that users will come to rely on -- in the case of small businesses, rely on to drive their own businesses -- than success stories are much more unlikely.

It's that dichotomy that explains why so few Web 2.0 startups today target small business with their offerings. The game is rigged today toward launching consumer services -- or sometimes, large enterprise services -- because that is where the cash (the sell-out) is.

Here's a few reasons Web 2.0 startups don't target small business:

1. Small business owners are impervious to hype. They don't have time to try the latest new thing for the sake of it. They need tools and services that make a meaningful impact on their small business today. They don't try tools just to try them.

2. Small businesses will pay for tools that matter to them. This may seem counter-intuitive, but this fact makes it much easier for a small software developer versus a Web 2.0 startup to target the small biz market. Web 2.0 startups need to deliver scale -- millions of users, tens of millions of page views. That means Web 2.0 apps must be free and viral. A small, focused software developer, on the other hand, just needs to pay the bills (and pocket some profit). It's easy to make a living selling to small businesses. It's tougher to make go public and make billions.

3. Small businesses focus on blocking and tackling issues. Find prospects. Sell them products or services. Collect payment. Start again. They don't care about "social graphs" or "content syndication" or "micro-blogging." That doesn't mean they won't use products and services based on those concepts if they'll help their business. They will. But Web 2.0 entrepreneurs and startups are focused almost exclusively looking to catch the wave of the next big trend.

One final thought: Web 2.0 startups themselves are small businesses themselves. And when *they* do business, rules 1, 2 and 3 above typically apply to them as well. Yet the business they are in -- cashing in by anticipating mega-market trends -- often means the products and services they sell simply don't appeal (and aren't meant to appeal) to mainstream small business owners.

OK -- I'd argue that's the rule. But there are *always* exceptions. Read our follow-up story:

Ten Web 2.0 Startups That *Are* Targeting Small Businesses
Posted By Rich Karpinski at 2:37 AM
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