Tech Not Taking Advantage of City’s Biz Network
Posted on 16. Sep, 2010 by Amy Berryhill in Uncategorized
Despite the recent recession and the reminder of the tech bubble bursting, New York technology startups underutilize their biggest advantage: the city’s huge customer base.
From venture capitalists, to advocates, to the entrepreneurs themselves, many agree that New York startups often fail to test their business plans on potential customers. Not only does this put the business at a disadvantage over competitors who use customer feedback to build a better product, it ignores one of the key benefits to building technology here.
“Before you decide to start a business, go to 100 client meetings. Because that is what New York is offering you, if nothing else,” said Nate Westheimer, organizer of the city’s largest tech meetup and a serial entrepreneur.
Westheimer could be criticized for standing in the way of the networking he promotes. As the organizer of the New York Tech Meetup, where each month a number of people have five minutes or less to demo their technology idea, he discourages questions from the audience about revenue. He says the goal of the meetup is to showcase technological innovation, not fill every need the broader technology community might have.
“It’s okay to have projects to do things that don’t have business models,” he said, “but people in this industry often confuse cool things with businesses.”
Charlie O’Donnell, Entrepreneur-in-Residence at First Round Capital, agrees that New York is the premier place to determine the difference between a cool idea and a viable business. He thinks that, because the buyers are here, startups have an opportunity to explore their potential customer base extensively. And what customers need might come as a surprise.
“People forget that, while an idea might be cheap to implement, the company won’t be cheap to run. They think about what’s needed to have three developers, but don’t consider the account managers, sales people and staff required to secure that revenue,” said O’Donnell.
According to David Silverman, a member of the team that creates the Money Tree Report at PricewaterhouseCoopers, some venture funded technology businesses in New York are clearly doing their homework. While his research does not specifically include data about companies testing a potential customer base, he feels that the local success stories belie the idea that startups are ignoring customer testing altogether. Silverman said many of the companies doing well are those that provide technical services for markets that are strong in the city already, like financial firms.
A startup does not need to be selling to any particular market, according to Westheimer, to find and test an audience in New York. “If you’re planning on selling something to restaurants, for example, walk down the street – any street. You’ll see plenty of them,” he said. The challenge is for the city’s tech entrepreneurs to go inside and explain that they are not only there to order lunch.
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