2. Make money to be able to make more money

This sounds like a very stupid advice, but in fact it isn’t. I have recently talked to a friend, who is a an investment director of a leading VC/PE company. He told that he was having problems because the companies he was investing in were losing money due to complete lack of revenues. Some of those projects were Web 2.0 startups, with very high hosting costs every month. Even though critical mass had been achieved he seemed to be unable to convert the considerable number of users his projects were able to achieve into real money. I told him that he could change this situation and start making money from day one. It’s simple:

A) Utilize ads starting from the very beginning.

If you want to start making money and if you have a website there is nothing more simple than using google, adbrite or any other similar system. If you have high traffic and readers that come to your site everyday or every week you will notice that they tend to utilize links on your ads section at least 5-10% of the times. It sounds bad, but in fact that’s an easy way to cover basic costs such as hosting, site management, etc. It’s hard to rely only on this kind of revenue, but it may easily represent 20-30% of your site’s financial results. A better way would be to focus on contextual ads only. If you launch a startup devoted to tourism, you are likely to find someone willing to click on links of travel agencies or airlines. So remember “context is the king”.

B) Find sponsors from the very first day.

Yes, it’s not easy, but you need to make an effort. Let’s imagine that you have a startup that requires few thousands dollars a month to be launched and maintained. If you have a steady source of income you can focus on the “conceptual” side of the business. It basically means that you will have time to think and rethink your content, without spending too much time on financial issues. This reminds me of some painters who want to be successful artists and businessmen at the same time. It can be done, but it’s not going to be efficient. Focus on what you are really good at: painting or accounting. It’s up to you, but never forget to choose only one of them.

C) Try to involve friends and people sharing similar interests.

If you manage to attract people who are enthusiastic about your projects you are likely to save money. Imagine how much it would have cost to hire millions of people who upload videos on youtube, millions, maybe billions of dollars. You can it done for free. Your enthusiasm should be contagious and make everyone feel proud to join the project. Motivation is the key, as you will see that many people will help you build huge projects almost for free.

D) Be original to attract media and save money.

A good strategy is to be controversial. Ryanair is a good example. How many times have you heard about advertisement campaigns that were very cheap, but allowed to let everyone know about a product. If you want to lose money: be boring and repetitive. If you want to make money: invent something that is totally ugly or attractive.

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1. Critical mass is absolutely necessary.

From my observation I can tell you that this point is essential. Let’s imagine that we go back to the time Youtube was not invented yet. You are the one who comes up with a fantastic idea. You want to allow everyone to videos and upload their own videos. You launch this project in your garage/studio and after 14 days you realize that CNBC prepared a show to present this great idea. Believe me or not it will take less than a month to have someone copy your project and invest in hardware/software that will be far more powerful than what you have. “Catch up effect” will start and three possible scenarios can occur:

a) “catch up effect” < word of mouth –> this basically means that people started talking about your project and you are likely to stay number 1 in your category. It’s very hard to achieve such a position, but possible. Two examples are Digg (especially for American users) and Wykop, which is probably the best Digg equivalent for Poland. Competitive advantage comes from the fact that you were the first to start something and the first to believe that it makes sense to invest in it. Let’s call it “first mover advantage“. From my personal experience I can tell you that clones usually do not work. Some time ago you remember I launched a Digg clone that was created to give prizes to guys that were the most active on the site. I was determined to give books, movies, etc. to those who Dugg stories and submitted new ones most actively. It turned to be a bad strategy. No one wanted to give up Digg, Reddit, Mixx or Propeller in order to join my site. I was really disappointed. but in fact it was a good lesson. It’s not easy to drive traffic to your site and it’s even more difficult to mantain it.

b) word of mouth < “catch up effect” –> that’s exactly the other way round. If you take 95% of startups and you use Alexa or Compete to analyze traffic (popularity) you will draw the following conclusion: “it takes less than 3 months for the average startups to be forgotten”. You will always think that you are going to be in the 5% rather than in the 95%, but that’s not exactly true. Any Venture Capital company in the world will explain this concept in the same way. Only few succeed and that’s why it’s worth having a diversified portfolio

c) word of mouth = “catch up effect“–> I would call it “perfect equilibrium”. It means that even though you are not in case “a” you are still likely to be one of the main competitors on the market. In Poland for example there are three social lending sites that have moreless the same positions and more less the same chances for further development: Monetto, Finansowo and Kokos. “Perfect equilibrium” is defined as 33, 33 and 33% market share. Innovations and additional (external) funding may change things quickly, but the “products” remains essentially the same.

Let’s put it simple now. Critical mass is “the minimum number of users you need to attract and mantain” in order to efficiently launch and run a startup. I would say that it’s similar to a break-even point that must be achieved so as to make your project look good. Three more things to remember:
* achieving “critical mass” in a niche is relatively easy - don’t try to “fight with the big guys if you are not one of them”.
** it takes time and money to promote a startup, especially at early stages (I will discuss this topic in detail in the nearest future)
*** never forget about the power of networking; it will save you both time and money.

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Use LegalTorrents, which is basically “an online community created to discover and distribute Creative Commons licensed digital media”. It was launched in 2003, but it is actually only today that this site has been improved. Now it works well on most browsers.

The secret about Legaltorrents is that every single torrent submitted to the site is reviewed by moderators for the proper licensing and then published the site. What is more, LegalTorrents hosts a high-speed seed for each torrent, ensuring that you should always expect to get fairly high-speed transfers; it’s indeed very fast (downloading over 400 KB/s).

What really matters is that the site is free and authors only expect you to make a small donation in case you feel like. That’s fair I think. So if you are still looking for a way to download torrents completely legally at 400 kb/s, now you know the answer.

Just one more thing.If you want to utilize the site properly you need to download and have a working Bittorrent client to get content from LegalTorrents. We recommend the following clients:

* Windows: µTorrent
* Mac OS X: Transmission
* Linux: Deluge or rTorrent

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As you probably know iPhone 3G data plans by AT&T makes users pay an extra $5 every month to get 200 text messages which usually came free with previous iPhone data plans. So below you can read a way to send unlimited text messages from iPhone for free.

Here you will utilize a famous email-to-text service called Teleflip.com

1. Create a new email message on your iPhone.
2. In the To: box type, 1234567890@teleflip.com (where the numbers are placeholders for any 10-digit phone number), type a message and send.
3. Enjoy free text messaging!
The message will be sent to the number in the email and all received text messages will be sent to you as an email.

If you want to use a web app to send text messages, use TxtDrop or Durgle as they work best on iPhone Safari.

It’s simple, but really effective. Hope it helps you save money.

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