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A note of optimism in these hard times

Mat Atkinson of ProofHQ left the following comment on my post yesterday about the impact of the credit crunch on venture capital:

I think that a recession is a chance for web-based businesses to thrive.-

For consumer oriented apps with an add revenue model CPA and CPC advertising revenue will hold up best.

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For business oriented apps with a SaaS subscription model, the pay-as-you-go, nothing upfront, rapid deployment, rapid ROI model has huge appeal to businesses needing to tighten their belts.

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If a company has bootstrapped (like we have done at ProofHQ.com) then a recession could be a great opportunity.

I think Mat is right that SaaS and CPA/CPC based businesses will hold up best, although depending on how deep the recession turns out to be it will affect us all to some extent.

His last point is a great one though – companies that come through the current period strongly will have a great chance to make it really big when things pick up.

April 4th, 2008 | Category: Entrepreneurs, Venture Capital
  • http://voicesage.blogspot.com paulsweeney

    I think elements of this point are true, but not all of it. Yes, selling benefit will beat out selling “applications”; yes, holding back on the cash investment into the start up will help them to sharpen heir proposition and their business model (out of necessity), but for companies that have addressed these issues and are now ready for the big internationalisation heave, the money is still required for marketing and sales. I would posit that not all SaaS is the same: horizontal, vertical, focus etc. will all influence how the lack of investment will hit. But here’s my take away: if you are selling incremental benefits through SaaS then this downturn will hurt you; if you are selling ten fold benefit that can be measured, its not going to hurt you. There is also value in gaining market leadership in any segment by investing when it is proven that the money will be well spent, and that the management is capable of spending that money well. IMHO.

  • http://voicesage.blogspot.com paulsweeney

    I think elements of this point are true, but not all of it. Yes, selling benefit will beat out selling “applications”; yes, holding back on the cash investment into the start up will help them to sharpen heir proposition and their business model (out of necessity), but for companies that have addressed these issues and are now ready for the big internationalisation heave, the money is still required for marketing and sales. I would posit that not all SaaS is the same: horizontal, vertical, focus etc. will all influence how the lack of investment will hit. But here’s my take away: if you are selling incremental benefits through SaaS then this downturn will hurt you; if you are selling ten fold benefit that can be measured, its not going to hurt you. There is also value in gaining market leadership in any segment by investing when it is proven that the money will be well spent, and that the management is capable of spending that money well. IMHO.

  • http://voicesage.blogspot.com paulsweeney

    Just an update: today from trendwatching on “conspicious consumption” in what I think is a related point: http://www.trendwatching.com/trends/statusstories.htm

  • http://voicesage.blogspot.com paulsweeney

    Just an update: today from trendwatching on “conspicious consumption” in what I think is a related point: http://www.trendwatching.com/trends/statusstories.htm

  • http://www.proofhq.com Mat Atkinson

    Nick

    Thanks for the mention.

    Paul is right pointing out that more mature businesses needing capital for customer acquisition may struggle to raise that capital. They would then be at a disadvantage against better capitalised competitors (time to focus on winnable niches?).

    Recessions are painful and will affect most sectors. All companies: new, old, SaaS, CPC will have to work harder and be more astute to succeed. However, those that do can take advantage with the right strategy.

  • http://www.proofhq.com Mat Atkinson

    Nick

    Thanks for the mention.

    Paul is right pointing out that more mature businesses needing capital for customer acquisition may struggle to raise that capital. They would then be at a disadvantage against better capitalised competitors (time to focus on winnable niches?).

    Recessions are painful and will affect most sectors. All companies: new, old, SaaS, CPC will have to work harder and be more astute to succeed. However, those that do can take advantage with the right strategy.