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Is Now a Good Time To Start an E-Business?

By Lou Hirsh
Sep 20, 2002 4:14 AM PT

The stock market and the dot-com world may be down for now, but that does not mean launching a new e-business is out of the question.

Is Now a Good Time To Start an E-Business?

True, the startup funding spigots have slowed to a drip, and entrepreneurs looking to strike it rich quick with little risk to their own wallets can forget about it. But experts say these factors did not stop business go-getters in previous eras -- long before the Internet boom and bust -- who truly believed they had something to offer the world.

New York University business professor Christopher Tucci pointed out that many of today's technology and commerce giants began life at a time when startup capital was not flowing freely, yet they succeeded in getting off the ground and eventually thriving.

The overall business climate should dictate the fate of a truly good business plan -- online or offline. "If I had a great idea, I would not wait for the business cycle to turn around," Tucci told the E-Commerce Times. "I would do what I needed to make it happen."

Factors Beyond Economy

Tucci, an assistant professor at NYU's Stern School of Business, said the recipe for entrepreneurial success has always remained basically the same: The startup needs founders who have knowledge and passion for the project; it must be based on a sound business model; and it must serve a real need in the marketplace.

Strong startup funding is also needed, of course, and such funding is much harder to come by, now. "Venture funding in e-commerce has pretty much dried up compared to the boom days," Giga Information Group vice president Andrew Bartels told the E-Commerce Times. "The venture capital firms are not out there scouting to find the next big Amazon."

With jackpot funders scarce, entrepreneurs are finding that they must commit their own resources or find angel investors among friends and relatives.

Standing Out

Because most major e-tail categories are already covered, and many others have been tried but proved failures, a startup founder's passion and commitment play a large role in determining a new venture's fate. To stand out in e-commerce, Bartels said, new businesses will have to either cater to new niches not already dominated by big players, or find compelling and original ways to present and promote existing product lines.

Among the best examples of the niche category are sites that cater to hobbyists and collectors not currently being served well in the marketplace. A well-executed site that draws a consistent critical mass -- whether of toy car collectors or aficionados of obscure musical instruments -- stands a good chance of gaining long-term traction.

Bartels said a good example of the second category -- new ways to present existing products -- is the gift site Red Envelope, which stands out by presenting a distinctive style and fashion sense that has attracted like-minded customers.

Technology Helps

There are also e-business opportunities that go beyond selling products. For example, NYU's Tucci said companies are offering services that help businesses save money and streamline operations, including customer service, production and inventory management.

Businesses also are using existing technologies internally to migrate their offline presence to the Web efficiently and affordably.

More opportunities for e-business startups could rise on the horizon as wireless technologies take off, Tucci added, eventually reaching a point at which commerce services can be delivered to consumers and enterprises without major infrastructure investments.

The Big Picture

As for those still seeking signs that the overall Internet economy has improved before taking the entrepreneurial plunge, that may not come until today's e-commerce giants, such as Amazon, show they can post consistent quarterly profits.

At that point -- which cannot be foreseen with accuracy, Giga's Bartels said -- venture backers may feel that e-commerce is reaching a critical mass and that it is safe to re-enter the investment waters.

As long as the basics are in place, execution on the business plan will always be the top determinant of success for a new e-business. With the technologies currently available to accomplish certain functions, a startup does not necessarily have to be a multimillion-dollar proposition.

"Right now may not be a good time for very capital-intensive businesses to start out, but that should not discourage everybody," Tucci said.


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