Running an online start-up not for the faint of heart

It’s been almost a decade since I was involved in the successful sale of the AME Info online start-up after a seven-year struggle to create the news and business information platform. Since then I’ve started another website and advised half a dozen would-be entrepreneurs to a greater or lesser degree.

Two groups have done well. The dynamic duo who set up a website development company have thrived and sold a stake in the business to an outside investor earlier this year. They’ve worked night and day at making websites and keeping them going. Plus they’ve marketed themselves around the UAE, building up a strong reputation.

A couple of English chaps also did brilliantly with a trading platform in an internet product niche. I won’t name the industry because their main worry is others trying to copy them. Would-be start-ups who insist on writing business plans and telling the whole world their business model take note: keep your great ideas under wraps, forever if possible.

What these two young men got right was to import their expertise to the UAE, where you often have a larger competitive advantage than in the UK. They also showed considerable commercial savvy in choosing their market niche and knowing how to write their own trading software.

Now we get to the less successful websites. I count my own financial comment platform among them, although it’s not been short of a quality audience. But it has been hit by Google’s influence on advertising rates and the meanness of would-be sponsors.

Basically, Google and copy-cat local advertising aggregators have an oligopoly on internet advertising rates and have forced them so low that you cannot afford to pay journalists anything like a commercial rate for the job. Sponsors, perhaps not unreasonably, have taken advantage of this situation too.

This means that running a quality website is impossible unless you have a state or private benefactor. In my case it’s been self-philanthropy, with others benefiting if they manage to become better investors or business people by reading the website. Why am I helping others to get rich for free? It’s a fair question.

I can think of a couple of other local information websites in more or less the same situation that keep on going – goodness knows how. In both cases the owners fortunately decided not to give up their day jobs. Internet publishing is no way to make a fortune these days.

Over the summer I heard from a former employee who asked me to read over an article he had written about why not to work for a start-up company. He’s been involved with a series of start-ups that went wrong, and clearly has not had a very happy experience. His principle complaint seemed to be that start-ups demanded enormous efforts from their employees and then blamed them when their ill-considered business plans failed to work out.

Unfortunately that is more often the case than not. Start-ups can be exciting, especially if they do take off, but if they come unstuck – and to be frank even the best ones tend to have some tough periods – then you may be better placed working for a more solid and reliable established company.

I can well remember how some of the journalists from a publishing house I once worked for used to talk to me enviously about my situation – but then AME Info was practically sunk after the September 11 tragedy. At the time I would have given anything to be back working with them again. But of course, when you are in a start-up you always have to put on a brave face and keep on going, or you really are dead.

Above all, you need to get your timing right. The ideal thing is to start at the bottom of the business cycle, ride it upwards and then sell just before it goes pear-shaped. That’s far more easily said than done. Do you have any idea how to sell a business, let alone create one?

First you need the right idea at the right time. Then you have to develop it successfully. And finally you have to find somebody who will buy it just before the market tanks.

So ask yourself: have you got the right stuff for an internet start-up? If not, then holding on to a good job during what may be a challenging year ahead might not be such a bad idea after all.

Peter Cooper is the editor and publisher of ArabianMoney.net.

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