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Mark Grossman

Starting a Business

30 May 2002

Once again, it's looking like a good time to start or grow Internet and tech businesses. My observation is that the CEOs, CFOs, CIOs and other leadership of the last round of dot com-to-dot bomb mania are back in high school. Now, it's safe for the rest of us to get going.

Having practiced law for almost 20 years and after doing this tech law thing for most of those years, I've seen my share of economic cycles. The list of tech products and businesses that have come and gone since the 70s is long and illustrious. Some disappeared, some merged into something else and some are still around, but they may as well have disappeared.

Remember "Central Point's PC Tools?" It used to compete with Norton Utilities. Do you remember "Zeos?" They sold mail-order computers before Michael Dell was a household name.

We all watched the tech marketplace prove Newton right again as it fell precipitously. In the late 90s and into this new century, while the price for computer hardware dropped like a brick, the price for services rose to unaffordable levels.

Things changed quickly. In the mid 90s, Web development was cheap because everyone was new at it and trying to develop a portfolio. In the late 90s, major Web development could easily get you into the six and seven figures. Demand was high, skilled programmers were in short supply, and it was a seller's market.

For a while, it seemed that nobody but a dot com could afford a Super Bowl commercial. Then, it all crashed and burned. At least, they didn't change the commercial to the ""

Now, I'm seeing a clear up-tick in the tech world. Interestingly, I started to see it in July and August of 2001, but then came 9/11. Everything seemed to stop for the balance of the year.

With the new year, I'm seeing what I would characterize as a pleasingly surprising increase in tech activity. I'd divide it into several categories.

The ones that started cooking last summer were what I've come to call "salvage deals." The survivors of the tech sector's debacle started doing deals they couldn't possibly do at the top of the cycle. Often, they bought the tottering remains of startups from the mania period or jumped into deals where they replaced some failed tech company--but this time on business terms that made sense.

Web site and software development has again become affordable. Guess what, the Web developers and programmers who could command monstrous salaries in 1999 are simply looking for good work in 2002. The Web project that was unaffordable in 1999 is suddenly affordable.

Economic reality hit the tech sector with the near collapse of the sector. It's been sobering, but undoubtedly a positive survival of the fittest experience.

The serial entrepreneurs who made some quick money early in the tech sector's rise to the stratosphere, but then may have made missteps later in the bubble period are getting back in the game. People who had retrenched and seemed to almost disappear are calling me again.

Like a maturing child, I'm seeing some differences in the tech sector's business practices. Skateboards, Chief Morale Officers, pool tables, ginseng tea and millions of dollars of funding based on 30-page business plans are definitely out. It's been some time since I saw a tech "contract" written on the back of a napkin. The "fun" part (lawyers do have a perverse sense of "fun") was litigating those napkins.

On this go around, "in" are Honda Civics, chief financial officers, coffee, funding based on a functioning and profitable business, and contracts negotiated and drafted by skilled lawyers.

This time around, it's back to basics. There's less focus on "Internet speed" and more focus on, "Let's make sure that the two sides of the deal actually understand what each expects from the other before they begin the deal."

I'm no longer seeing business plans based on fantasy like 50 percent market share, and eight-figure revenue based on "first to market" and banner advertising revenue. Now, it's more like we have a functioning and profitable business, and we believe we can grow it faster if we do some key deals. Many of these involve brick and mortar businesses that now see a way to make the Net a profit center. It's now often clicks and mortar and variations on that theme.

Tech's been beaten up in the last couple of years, but it's not as if it's a passing fad. It's not going away. The sector is starting to churn again. Bargains abound in the marketplace and the next round of millionaires is ready to be made. It won't be the followers who get in at the new top. It will be the ones getting in now--at the new bottom--who use sound business practices to grow their tech business idea into something substantial. Now looks like the time to make your leap if you have dreams.

Starting a Business is republished from
Mark Grossman
Mark Grossman