Issues in Website Entrepreneurship
by Eric Schlachter, Esq.
Cooley Godward Castro
Huddleson & Tatum
1.
Raising Money.
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Develop a business plan
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IPO market remains hot (Netscape, Yahoo) but not for everyone (Excite,
CompuServe)
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Venture capital remains hot but requires multiples
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Corporate partners are rare
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Angel money and bootstrapping; Dilution v. time-to-market
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Watch state securities laws
2.
Identifying Revenue Streams.
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Internet access
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Web hosting
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Software/enabling technology
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Subscription services
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Advertising
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Marketing presence
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Data mining
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Commissions
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Sale of ancillary goods/services
3.
Internet Access.
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Not really a web-based business
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Like a utility
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Competition
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Netcom, PSI, UUNet
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Commercial Online
Services and local BBSs
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Major telcos (MCI,
AT&T)
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Conclusion: commodity market means high initial investments, bounded ROI
4.
Web Hosting.
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Fragmented market
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Tends to be priced per hour
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Can be entree to other forms of consulting services
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Conclusion: good for small entrepreneurs, but limited upside
5.
Software.
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Categories: browser, browser plug-ins, database management, page creation,
server software, server enhancements (search engines, chat engines, etc.), Java
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Be careful of markets where software given free!
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Intellectual property protection issues
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Market timing
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Conclusion: exploding market, many players, high multiples
6.
Subscription Services.
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How much of online service revenues are going to internet access?
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Much content is being made available freely
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Always will be high value specialty publications with limited distribution
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Conclusion: few serious business plans are predicated on this
7.
Advertising.
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How does this differ
from web hosting?
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Opportunity for
narrowcasting--user demographics key
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Page impressions is
common metric, but what about caching?
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Enhanced revenues for
identifying desired consumers
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Conclusion: expect a
shakeout, but still a winning approach
8.
Marketing Presence.
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Cater to your own
customers
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Opportunities to know
your customer better
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Your customers are
valuable--sell your links and advertising!
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Conclusion: most
businesses are finding this part of the cost of doing business
9.
Data Mining.
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Technological barriers
to knowing your users
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Registration, surveys,
etc.
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JavaScript and user
tracking
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Demographic data
highly valuable
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Privacy restrictions
may be more a question of ethics than laws
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Conclusion: valuable
but use cautiously
10.
Commissions.
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Pay-to-play: base
payments on producing results
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Potential to make
existing markets more efficient
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Potential for enormous
returns by taking a cut of every transaction
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Watch out for legal
problems!
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Conclusion: high risk
but high reward
11.
Sale of Ancillary Goods/Services.
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Use cheap distribution
costs of Net to build customer base/brand name
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Examples: Doom,
Netscape, consulting services
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Beware--a diagonal
competitor might use this on you!
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Conclusion: the wave
of the future
12.
Issues in Site Development.
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Organization is
important
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Content is king. Dead sites are death.
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Beware the
frills--watch for incompatible browsers, bandwidth hogs
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Server response time
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Outsourcing: IP
issues, what happens after termination?
13.
Fun Legal Issues.
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Trademarks and domain names
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Contract formation and
disclaimers
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User-to-User
interactivity and sysop liability
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Communications Decency
Act
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Export control
About
the speaker: Eric Schlachter is an attorney practicing in cyberspace law with
the Silicon Valley firm of Cooley Godward Castro Huddleson & Tatum. He has a law degree and an MBA in
entrepreneurial finance from UCLA. He
is an adjunct professor of Cyberspace Law at the University of San Francisco
School of Law. He can be reached at
schlachtere@cooley.com or (415) 843-5154.