One year ago, we sold Spreets to Yahoo!7 before the business was 1 year old. It was one sign in many to media companies that the world had changed. The new world moves quickly. This was not a vanity investment from a media company trying to be cool, it was a real investment that materially contributes to Y!7’s bottom line and the time between Spreets deciding to start and closing the sale was faster than most big companies can commission a research project.
We spent 2011 in talks with a number of media companies and explored all kinds of models. They all seemed too hard, and pulled our process too close to how media companies work today. A direction, we felt, would compromise our ability to succeed.
In the middle of 2011 we started discussions with the team at APN and found our ideal partner for prototyping a new model for corporate innovation that works. We have now announced our pilot projects.
First, APN has invested in Friendorse, our business that helps local people find what they need in the places that they live. This strategic investment will bring startup speed and agility to the APN portfolio to develop a new channel in their local markets. It helps us grow the business at a crucial time in its life and gives APN access to a new asset before it gets crazy expensive.
Second, we will launch a new business with APN. This is terrifically exciting because we have found the model in which to do it. Simply, it is no different to any entrepreneur that works with us. We co-invest and Pollenizer provides the execution team needed to validate the new business. We accept the power of what we each bring and begin our partnership focused on the pursuit of value. That’s all that counts.
This feels like an important step in the development of our ecosystem. Traditionally, large corporates have not contemplated work with early stage businesses. There are various reasons for this, including the following paraphrases:
“Any deal we do, large or small, needs full due diligence and costs tens of thousand in legal fees. So we don’t do deals under $2 million in value.”
“For GST reasons, we need to own the company fully so that we can avoid charging GST on media contras.”
“Anything we do, we need to do properly” = big study, full team deployment including usability team, focus groups, etc
“It needs to move the dial on our EBIT line before we can look at this.”
All these and more, gently shut the door on early stage entrepreneurs.
The problem is, the internet economy has changed. Two people in a lounge room with a wifi connection and a laptop each can launch a real business for less than a large business spends writing a scoping document. I don’t need to go over the reasons for this. You know. Powerful tools and libraries mean most of the hard software engineering stuff is done, people spend money on the internet like never before, the global market is ours for the taking, mobile web use has overtaken browsers (and people pay on mobiles) … by the time Goliath looks up, David has eaten his lunch.
We startups know how to live in this place. We work fast, we learn, we are happy to be a bit scrappy if it gets us to the next proof point faster. If we stuff up, we dust ourselves off and get back into it rather than face a media backlash about our big corporate failure. We don’t over-think things. We just do it and measure what happens. We can materially help big companies make new assets.
We startups have reached a new level of autonomy but let’s not get cocky. If our business model needs more than a few thousand users to get traction, we need help. As our startup evolves and needs to become a company (more than a validated idea), we need help. If our business needs a sales team to test selling new products nationally, we need help.
We are very excited about this new partnership. We help each other to pursue value using the tools that we each have and together we are stronger.