Professional social network PartnerUp has surveyed 862 real estate, mortgage, and financial workers about their intent to start their own businesses following this summer’s subprime mortgage financial crisis.
The results are thought-provoking: 56.2% of the respondents claimed that they were “seriously considering starting a business within the next 6 months” and 13.4% claimed that they “are [already] in the process of starting a business.” Out of this whopping 70% of workers who have or intend to become entrepreneurs, 42.1% gravitate towards starting something tech-related (”Internet/Web/IT/Technology”). Assuming this survey is representative, almost 30% of this demographic can be expected to try their hand at the Silicon Valley Dream over the next year.
This news can be taken very positively. The credit crunch has made many of these professionals down on their luck, and entrepreneurship could be a saving grace that will not only provide them with new opportunities but create more jobs for others as well. Before you know it, the crunch actually stimulates the economy instead of the other way around. Such optimism is expressed by a respondent’s remark that “starting a business is an incredibly satisfying experience…it is so great to know that you control your own destiny.”
But hold on a second - do we really want ex-real estate agents and bankers heading into tech? It’s worrisome to me that people coming from entirely different industries think they can foster a successful tech startup without needing much familiarity with the industry or exhibiting any technical skills to speak of. The success rate for startups is already frighteningly low, and that’s accounting for people who know what they’re doing. The same respondent quoted above is currently developing JustMyEvents, “an events-based online social network”. Oh boy. I can safely say that we do not need another events-based social network (run a Google search for “JustMyEvents” and you’ll see that the problem lies not only in the idea).
Here’s my advice for professionals coming from completely different industries who think they can achieve fame and fortune on the Internet: think very hard about your idea and business model; educate yourself thoroughly about Web 2.0 trends and concepts; do your homework on competitors; find a team of technically skilled, motivated, and smart individuals who love your idea; and figure out just what you bring to the table (and don’t rely on your marketing skills; they won’t be needed until later). Then, and only then, think about switching industries - you’ll save yourself, and your potential investors, a lot of trouble.
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“do your homework on competitors; find a team of technically skilled, motivated, and smart individuals who love your idea”
What they’re going to run into is saturation. There are plenty of cottage businesses they can start and leverage the internet as an ordering and catalog platform. This would be a much safer bet for ex-financial sector people. To go head on against experienced programmers is extremely risky business.
Who cares, the barrier to entry is so low, they can just use LAMP architecture and hire a developer for like $10 an hour and have their “startups”. As for your advice, do they need it? I hate all this talk about bubble, because the fact is no one cares about these companies except VCs. This isn’t the late 90’s where everyone is going public and thus the risk exposure is increased for the general market. The people hurt when these business don’t pan out will only be the entrepreneur and the VC firms. Web 2.0 could implode tomorrow, and most people wouldn’t even notice. The economy certainly would barely be affected.
You have to realize that about 80% of Americans dream of starting their own business. But only like 1% actually goes through with it. So I wouldn’t be too worried about those guys.
“Who cares, the barrier to entry is so low, they can just use LAMP architecture and hire a developer for like $10 an hour and have their “startups”.”
But that would be garbage. Financial sector people are used to allotting the actual required resources to be successful. That would be like trying to start a Yugo style car factory to compete with Detroit, which itself is not doing so well. These people want to complete the goal successfully.
I believe that everyone should be allowed to try the “internet entrepreneur” thing, however I agree that the success rate is often times very very low. In fact even people “from the industry” succeed at a disparagingly low rate, so I say what the heck the more the merrier. I think what we will end up with is the internet’s version of Amway. A whole lot of people signed up with very few stories of pyramid glory. That said, yes I am available to design websites, lol.
Andrew - good point, although even if the percentage is a lot less than 30%, there’s still reason for concern I think.
Not at all, if anything the opposite will happen as many would be entrepreneurs won’t be able to pull cash out of their homes financed with sub-prime junk. Lack of credit leads to less cash resources, which of course results in less bootstrapping. Don’t expect more entrepreneurs, expect fewer.
Econ 1.0
I agree that there’s already an oversaturation of everything these days, but what makes these people any different than techies? If a person starting a business was mostly a Software Engineer who used C++ or Java for years, what did he really know about business, marketing, and for the most part, communiation skills? Probably very little.
So if a real estate person or finance person starts their own business, i’d imagine they have their own skillsets the techies didn’t.
And business is rarely just about technology. Plenty of smart techies failed miserably because they had no clue that starting a business required more than being just a code-monkey.
I just think this is an arrogant article. Like I said, if you’re a software engineer, who is to say you have a clue how to start a business. And if you’re a real estate agent, who is to say you have a clue how to build a web site. A lot of these successful startups recently, haven’t exactly been a ” One person company.”
Interesting post; check out this article “Subprime Fallout Could Help Venture Capital” from the NYTimes in August -
http://www.nytimes.com/2007/08.....nture.html
oh sorry, I guess you have to log in to see it.
If all these people are going to be starting interent related business they are going to want to rank for whatever it is they are offering. I would see this as a boost to adwords in the short run.
I think its a good thing for people to try new things whether they know anything about what they are doing or not. You can have all the tools and resources in the world and if you are not motivated or inspired it wont matter. These people will hopefully have both, good luck to them.
Good points Pete (#8).
Here are some things to think about for all those folks who keep crying Internet saturation, bubble 2.0, blah blah blah…..
- the world has 6+ Billion people in it (I’m not talking about those with a broadband connection at this time)
- there are millions of ‘communities’ or small social circles in the world
- each of these communities requires plumbers, barbers, painters, bus drivers, etc.. etc… etc…
- each of these communities generally produce enough money, products, and overall life to sustain themselves (generally)
- the majority of businesses in the world are small ones, not large ones, most are small owner operators that make enough to pay the bills, and raise a family
- not every web startup needs to be the size of myspace, youtube, or facebook to be successful to the people starting them
- if any of these entrepreneurs start a web related business and build their own network of 1000-3000 people that can sustain their livlihoods - that is all they need.
- some may even be more successful and build their networks into a bigger company, garnering the wealth that so many are after
- back to all these web 2.0 start-ups and non-techies that want to start them, oh and lets not forget the people that read this blog that think they are smarter than everyone else…
…communities are here to stay and there will be millions of them…their success will also be judged by the people who started them and what their objectives were in the first place….and not YOURS!
If you don’t like a community or a network, go find one you do and save your negativity for someone else.
Enough said, if you don’t get the picture after that, you shouldn’t bother being in business, go get a job driving a truck and be a grunt the rest of your life.
I have 100k to invest. I’m thinking about properties or
a startup company. Which is safer?
I forgot to mention that for the people who question this statement;
“..- if any of these entrepreneurs start a web related business and build their own network of 1000-3000 people that can sustain their livlihoods - that is all they need…”
I’m not talking about the site surviving and thriving with 1000 - 3000 on ad sense alone. If your revenue model is strictly advertising, go get that truck driver job I mentioned.
Bravo, Len. Actual communities with real, organic models will always prevail. There are so many unserved business constituencies.
“I have 100k to invest. I’m thinking about properties or a startup company. Which is safer?”
A. properties
Well I’m still not worried…few reasons:
1) Those guys are old school, old farts who aren’t exactly computer savvy.
I sincerly doubt many of them will go the start up route…most likely it’ll be something along the lines of an e-store/ebay store
2) They are most likely located outside of hot spots for programmers.
3) They most likely have no clue sites like elance even exist, and even if they did their site design will most likely include a 1 page note that asks for a digg clone with a bright pink background
4) They are not internet savvy, so they don’t exactly know whats been done on the net, and what complaints people have about current sites
5) Most of them cannot afford to finance the project, and their lack of knowledge won’t give them any 3rd party funds(VC/Angel Investors)
6) They have no clue how to market on the internet, so they will struggle in getting users
7) Many of them have families, which means they won’t be able to do the bootstrapping phase for that long
9) Most of them won’t have any connections to get their project off the ground
10) Most of them will try to repeat success of the big companies and fail miserably.
Will some of them succeed? Statistically yes, but I sincerly doubt we’ll see that many new unique start ups coming out from this.
How many CEOs of startups out there have a degree in computer science or any other related disciplines (math, physics, etc)?? At the end it does not matter. While it might help - and not always - what matters is how effective they are in hiring the right guys all around and they need to be leaders. If you have the right people, with a half solid idea and you are a leader, then your chances are just like everybody else. No need to be a nuclear or rocket scientist to run a company that uses technology.
And that is another thing … there is big difference between a tech company and a company that uses technology and heavily relies on it. That difference escapes most people. People think because they have a web site all of a sudden they have a TECH COMPANY. Come on … get real. You have a company that uses technology at its core to accomplish the business goals … far from being a TECH COMPANY.
Actually, I would wager a guess that 50% of the respondents are going to become contingent and contract tech recruiters, 45% of which had been recruiters in the past and became mortgage brokers after the tech bust in 2001.
12: Sorry…eek:
“each of these communities requires plumbers, barbers, painters, bus drivers, etc.. etc… etc.”
Sure, but having a barber as an exec of an inet company is a shame. You ever actually discuss internet ideas with a plumber? Doctor? Business executive? I have. It is laughable. And sad. They have many hard lessons to learn. Now, if they teamed up with a seasoned inet vetran…or even nerd savant (Rainman idiot), the synergy can work magic.
“each of these communities generally produce enough money, products, and overall life to sustain themselves (generally)”
I suppose. If you’re a bachelor living in a trailor park in N. Dakota eating roadkill. $300/month is mad money. Pays for your Direct TV.
“if any of these entrepreneurs start a web related business and build their own network of 1000-3000 people that can sustain their livlihoods - that is all they need.”
In all honesty, it’s not terribly hard to get 1000-3000 people as members of a website. Making more than a couple bucks/day on that few - very difficult unless you sell a consumable (but then getting 1000-3000 members is very hard because that market is well beyond saturated - why buy your toothpaste?).
17: is more correct.
This will be a win for developers. Hurry all the developers jack up your bill rates. Make some cash off them.
This is how we end up with ideas like that stupid “cat” or “mouse” thing that you could use to scan a bar code on newspapers and magazines to read more information about the article on the web. Man I would pay money if anyone still has one of those stupid things.
Did every city/stat have that stupid idea? Or was it just Dallas TX?
@Jason
“This is how we end up with ideas like that stupid “cat” or “mouse” thing that you could use to scan a bar code on newspapers and magazines to read more information about the article on the web. Man I would pay money if anyone still has one of those stupid things. Did every city/stat have that stupid idea? Or was it just Dallas TX?”
You are referring to the cuecat: http://en.wikipedia.org/wiki/CueCat. I live in Dallas, and funny enough just saw one at a garage sale last weekend. Brought back memories…
#20 - Steve,
I suppose your comments are based on irony, seeing that you are devoid of coming up with an original idea of your own.
Of course I am referring to your copying of the ‘copycats’ pretending to be “fake somebody”.
Seriously start looking for that truck driver job I referred to…
That goes for the fake Steve Ballmer always posting here as well
Don’t you realize how tired that is already.
Oops more irony I guess.
Don’t you think CROSS FUNCTIONALITY can bring out more ideas with i-net. Everyone need not be a software geek to succeed. Good Luck!!!!
This post is absurd and totally devoid of logic. Pathetic, even for a recent grad. That last graph…wow.
17 - Ramblings of an idiot. You sound like a 15 year old dork (no offense to any smart 15 year olds out there). Go back to your regularly scheduled masturbation session.
This is the dumbest post I have ever read. Are you an intern at TC?
First, people lie. There is no way in hell a bunch of real estate agents are going to run out in the next year and start the next YouTube.
Second, the Web 2.0 bubble is going to burst - its now all about the money and that’s how you know it won’t last much longer. It will be the same thing you saw in 2001 - programmers selling mortgages and starting landscaping companies because all the capital has dried up on the back of a bunch of bogus proformas and busted dreams.
Figure it out…
Wow, this was a very ignorant, and flat out terrible post. So only techies can start online companies?? I suspect that most of these folks just want to make a living not create the next billion dollar company. And what is the point of pointing out to search for justmyevents.com? Yes it’s a crappy idea but..umm..the site appears to be under construction.
I think we need an influx of good ideas and companies. It seems to me that techies are the ones creating the same old social bookmarking/social network/mashup/video-photo sharting etc crap.
“Here’s my advice for professionals coming from completely different industries…”
Why would anyone ask for, or accept your advice?
What is on your resume that makes you think you are in a position to tell people they should not take a shot at their dream?
What have you done?
Seriously. Please reply.
entrepreneurship is about connecting dots - not creating small businesses. (it seems you’ve mixed the two in this post.) it’s matching an idea to funding and executing a sales/marketing plan. and you need a good network to do that.
best odds of success are when you pursues an opportunity in your knowledge and experience domain. otherwise you’re essentially going back to the mail room. can’t underestimate how much you really do know about what you do or did.
if tech is a must, them something like http://www.propertizeme.com makes sense for property people.
hope is not a strategy.
AGREE with #1
???? this whole post is ill-conceived claptrap
lets see, credit has evaporated, so those who were unsuccessful at being independent realtors (a market predicated on credit) will somehow be successful doing vc-funded websites (another market predicated on credit) ???????
maybe they can pick up mad koding skillz from that guy who advertizes the “learn your computer dvd” on cnn
looks like the brains at TC have taken the afternoon off and turned over the keyboard for amateur hour
and please this whole idea of “founders” of companies has become meaningless. you walk into a cafe in palo alto and 60% of the people there are “founders” yet they can’t string together enough capital to get a bus ticket to sacramento. any idiot can buy a domain, put some crap up on it and call themselves founders.
Does this mean people will be moving out of REITs and creating ISITs (Internet startup investment trusts).
I think the very reason many of these Brokers and Agents (read “strippers”) are trying to become entrepreneurs is due to a lack of funds. Thus, unless they come up with an amazing concept, they will never get their feet off the ground. Unless of course they can digest some of their own rhetoric and somehow get an adjustable-rate, negative amortization, no proof of income small business loan?
@34
you mean like the Megan family? they’re hoping for something big. see: http://www.megamistakes.com
26 - what graph?
28 - I already recognized in my other comment that “people lie”, and much of the rest you say seems to resonate with my point, so…?
29 - I never said that only techies can start online companies; I just suggested that they need to prepare themselves, just as I would have to prepare myself were I ever to become a real estate agent or banker. I do recognize that non-techies can (potentially) bring a lot to the table but they still need to prepare themselves for this very peculiar industry.
30 - I’ve been pitched a lot of poorly made websites with bad ideas in my time here at TechCrunch; I may even put that fact on my resume one day.
And whoopie, wtf mate? Did you even read my post?
“Second, the Web 2.0 bubble is going to burst - its now all about the money and that’s how you know it won’t last much longer. It will be the same thing you saw in 2001 - programmers selling mortgages and starting landscaping companies because all the capital has dried up on the back of a bunch of bogus proformas and busted dreams.”
Businesses start out on the idea of honest work to produce an honest product which will be sold honestly for a profit. When analysts get a hold of an honest business scheme, they try to squeeze money out of different parts of the business by way of cutting it up into cold numbers and trying to exploit those numbers. They say, well if we can remove x, from business x, y, z, then do it with n cheap labour, then we can make r amount of money.
They put this into a business plan format, and try to make the investors forget that the business is not really divisible like that if you want to hold the integrity of the original idea which the customers bought into.
Then when they implement it and it fails, which btw, they already knew was going to happen, they have already paid themselves a good 2 years of 150k salaries and ride off in the sunset in their new hot sports car.
Then they rinse and repeat.
These are not entrepreneurs or business people. They are scam artists.
To truly build a good business online is exactly like building a good business offline. It’s no cheaper, and it takes every bit as much work. You can only fool people so much with window dressing. Facebook tried to fool all of us with that valuation, and even with MS behind them for 1%, they got caught out there, like a receiver in the endzone waiving their arms, but with nobody passing to them because they are too far out.
Lesser artists have tried it with lesser amounts and they were successful to a lesser degree. If you don’t intend to make an honest go of it, put your whole heart and mind into screwing the investment industry like chasers.
As a veteran of the first bubble, I agree that the invasion of non-qualified and unskilled morons who decide to brand themselves as internet geniuses isn’t a great thing for silicon valley. There are still plenty of those people around from Web 1.0.
For the sake of all companies competing in the current pre implosion Web 2.0 environment, we have made a video of how a real company should present itself to the public.
I believe that our presentation can help you correct your flawed models and realize the error of your ways. The time is now to learn from a company that is poised to give google a run for its money and to introduce the first Canadian search engine.
Enjoy! http://www.youtube.com/watch?v=_xKHz-UsMVQ
This is a really good post imo.
I agree with many points. As a matter of fact I can relate to many points here, as I went through a similar transition back in 2000.
When the crap hits the fan is when the next batch of great start-ups begin. Take today as an example.. Reading the paper this morning there was an article about Kaiser Permanente (Medical HMO) laying of something like 150 of the IT staff in Pleasanton, CA (SF bay area). Don’t you think that a certain % of these people will start a healthcare related tech/web company in the coming years and these same people have incredible insight into was is currently working via electronic healtcare and hipaa compliance…..Now that eHealth in starting to gain much attention if I was a VC I would be salivating and stalking these employees in the Kaiser Permanente employee parking lot.
As a matter of fact if any of these ex-employees are reading these posts and have a good web healthcare idea please email me sm1224 a gmail.
If you start a company here are the five keys:
1) bootstrap the business
2) build a product
3) get revenue for the product
4) focus
5) repeat steps 1 to 5
—-If you have customers, product and revenue you have completed 80% of the equation and are well on your way. What’s left is making sure the market opportunity is big enough and EXECUTION—- BY all means stay away from VC money as long as possible as it can/will be very disruptive—
Shouldn’t be a problem. There’s been plenty of tech companies started by, led by, and managed by people who don’t know shit about what their company does. Technology is not what matters to a technology company. Sales do. It’s all about memorizing buzzwords and keeping track of who made them up. What they are, how they work, and how they are made are irrelevant. All businesses ultimately have the same product: money, for their upper stakeholders. The means are arbitrary. If it wasn’t, we wouldn’t have business school; it’d be like teaching, where you get a certificate with a concentration on a particular field.
Hey, good for them - let them go pursue their dream. One or two might even earn a living at it.
As for the comment about “it is so great to know that you control your own destiny…”, clearly they haven’t dealt with venture capital guys…
Good article. In 2001 everyone was running from tech and going into real estate. That lasted until - last year. Now it will reverse for a bit, until the next big thing comes along. To me, there’s nothing wrong with this.
Mark,
Sorry, graph == paragraph. Faceloop, is absolutely right. You do not have the credentials to give advice on the topic of entrepreneurship. Your response to him doesn’t help your case.
Frankly, I find the the opinions of most of the contributors here to be rather shallow and more than a little suspect in terms of integrity. Sometimes TC seems like a pay-per-post operation. This post in particular has that feel, there seems to be no reason for it other than to promote PartnerUp.
A legitimate post on the survey would start by linking to…well, the survey. Some examination of the sample and the motives of the sponsor would also be in order. At that point, I’m quite sure, a competent analyst would stop and find something else to write about. However, let us pretend that there is some valuable data here and examine your analysis. Essentially, you think realtors and bankers make for poor tech entrepreneurs. Fine. But, you don’t make a logical case for your thesis. That’s the real problem. Instead of making your case, you go on to give advice to entrepreneurs that you obviously pulled out of ‘Startups for Dummies’ or something.
Oh, and that parenthetical about marketing skills is wrong. Whoever put that idea in your head is an idiot.
Mark:
For me this article is flawed because I think the survey was misinterpreted by a fairly wide margin. It seems to me that real estate professionals interested in starting new companies are most likely to start their own real estate practice, which in my own subjective observations, is very common and “something tech-related (’Internet/Web/IT/Technology’)” could easily mean a website for their new practice. I bet these numbers are also true of lawyers, insurance agents and any other services industry where startup costs are low. However, the conclusion that real estate agents are thinking about founding high tech startups would be more believable to me if the survey showed growth in the rate of folks who had actually started working on their new businesses.
But then again, maybe I’m misreading your interpretations of the survey. Could you link to the survey so readers like myself can take a deeper dive on the results?
thanks,
Andrew
This was a harsh post but I believe it stems from a misunderstanding of what separates a banker from an investment banker. To me, throwing a buzzword in front of the word “banker” is the same as throwing a buzzword in front of the word “network”. We are not looking to take an equity stake in your company and nickel and dime it to the ground, but provide you with differentiated services that will help you plan for future growth.
The volume of new entrepreneurs is not a problem for everyone . It will be good for some businesses like hosting companies, web developement companies, Pr firms etc … People will have to spend money to get their businesses started .