At the height of the dotcom boom, operating a "proper" Internet startup meant hiring lots of employees, renting a cool office space, buying $1,500 desk chairs and throwing parties with open bars. Then the boom went bust and the flow of capital into new Net businesses slowed to a trickle, forcing the eager entrepreneurs of Web 2.0 to replace the free-spending ways of their predecessors with something more sustainable — and effective. Turns out they've done more than that. Today's cash-conscious Web startups are tapping low-cost tools and resources, from free online software to the brainpower of the masses, to save money, reduce risk and, in many cases, create better products. And in doing so they've created an operating model that can be adopted by any company looking to grow and profit. In many ways, b5media Inc. — one of the world's largest blog publishers and the company I work for — epitomizes this lean-and-mean new way of doing business. Although we received $2 million in venture capital last October, we operate as if every dollar counts. To communicate with employees scattered around the world, we use Skype to make long-distance calls over the Internet at no or little cost. All of the company's 165 blogs (and counting) are built on WordPress, a powerful open-source publishing tool that's free for personal and commercial use. And the company doesn't pay rent, either. CEO Jeremy Wright, all of our full-time employees and I work out of home offices; our corporate "uniform" is closer to jeans and a T-shirt than a suit and tie. If you had to describe the way many Web startups now operate, it is with pragmatic optimism and strategic and operational creativity. This has led to a healthier, more down-to-earth business environment and supported the creation of all kinds of new low-cost tools and tactics that could — and maybe should — become standard corporate features. Some of these tools include Web-based services, such as Google Docs (word processing) and FreshBooks (accounting and billing), that reduce operating costs yet provide all the functionality of desktop software packages. As well, many companies are capitalizing on a new and distinctly Web 2.0 spirit of collaboration where people within the community are happy to share their ideas and knowledge — often for free. DemoCamp is a good example of how this isn't your father's business (or your older brother's). It's a no-frills conference concept in which entrepreneurs make presentations in front of their peers, then face questions, criticism and, maybe, kudos from the audience. These events happen all over North America, usually once a month and at no charge to attendees. Presenting at DemoCamp is not a risk-free proposition, but publicly exposing your ideas and products can generate invaluable feedback. A similar phenomenon is crowdsourcing, whereby companies encourage outsiders to contribute concepts, research and their own labour to the development of products (mostly software or online services, which can be worked on remotely), usually for free. Two high-profile examples of crowdsourced products are the Linux operating system and the Firefox Web browser, which were created by an army of volunteers around the world. One of the leading proponents and users of crowdsourcing is right here in Canada: Calgary-based Cambrian House. In fact, all three of the company's products to date were built upon the ideas and horsepower of its virtual "employees." While it's an unorthodox approach to doing business, crowdsourcing is an easy and affordable way to harness unprecedented volumes of intellectual capital. Some business leaders will look upon this brave new wave of tools and tactics with skepticism. How can the unpaid masses do a better job of creating products than my employees can? How could a free Web service be as good as the shrink-wrapped software I buy for $500 a pop? If you're in this camp, there's little harm — or cost — to experimenting with Web 2.0 before embracing whatever works best for your business. It might involve a lot of trial and error, but adopting a new way of thinking and operating can provide substantial rewards — maybe even a $1,500 chair.
Web 2.0: Power from the people
Originally appeared on PROFITguide.com