Seth Godin has a good post on things you can learn from music business:
He makes some great points, but two in particular really resonate with my thinking about technology startups:
1. Past performance is no guarantee of future success
Every single industry changes and, eventually, fades. Just because you made money doing something a certain way yesterday, there’s no reason to believe you’ll succeed at it tomorrow.
The music business had a spectacular run alongside the baby boomers…
…It was a well-greased system, but the key question: why did it deserve to last forever?
It didn’t. Yours doesn’t either.
In the web and software startup worlds, a lot of weight is put on past performance. Investors will court you and staff will trust you implicitly if you’ve executed on a good idea in the past, if you’ve successfully grown a company, etc. But I’m not convinced.
Don’t get me wrong: the lessons of the past must inform what we do now. But successful entrepreneurs can fool themselves into thinking they have everything figured out, that they have their fingers on the pulse of the industry, or that the same strategies will work again. This is folly.
As Seth says, every single industry changes. The software industry changes dramatically every few years and the web industry changes every few months. Experience with one type of business model (e.g., software licenses) can be dramatically different from what is needed for a different model (e.g., ad-supported web properties).
A good performance history is valuable for many reasons, just remember that it is not a gold ticket to future success. And sometimes it is even a hindrance.
5. A frightened consumer is not a happy consumer.
I shouldn’t have to say this, but here goes: suing people is like going to war. If you’re going to go to war with tens of thousands of your customers every year, don’t be surprised if they start treating you like the enemy.
Lawsuits are not the only things that can scare customers. Another common source of customer fright is the future of a startup. Of course no company is guaranteed to be around in the future. But when I buy an el cheapo stereo from Wal-Mart, I’m pretty confident the store will be open next week when the stupid thing doesn’t work. If I buy version 1.0 of your software though, I am far less confident that you will be around in 6 months to support or upgrade it.
An important consideration for software startups is how they will reassure customers about the future. For example, many companies put a copy of their source code into escrow. In the event of the company disappearing, customers can obtain a copy of the source code from the escrow company. Companies offering hosted solutions need to think about providing a way for customers to regularly obtain a backup of their data.
Startups need to think about how they can alleviate the fears of their customers and let them focus on being happy with the products and services.
Just a few things to think about…