The Delusions of IT Startups

Posted by Mark Everett Hall

If you've ever attended a venture capitalist conference you will hear the truism: Is it a feature or a product? That is, does the start-up company being considered for funding have a true, standalone product that others can add features to, or is it just a feature to another product? Both approaches can be considered shrewd investments, but the exit strategies for the VCs are substantially different.


No matter what, the (usually) young entrepreneurs consider their brainchild a true product, a "platform" even, often deluding themselves into seeing themselves as technological visionaries who are about to revolutionize the IT industry.


Hard-bitten VCs like their startup leaders to be delusional, at least in public, and especially to the press. They want their wet-behind-the-ears CEOs boasting of their new platform (a term so overused by IT vendors and PR folks as to be laughable and meaningless) in hopes of conning journalists to scribble something about the company. And they especially want the CEOs to imbue enthusiasm and passion into their overworked, underpaid staff to get that feature or product (excuse me, platform) into the market.


I've always been jealous of venture capitalists because they have a serious advantage over people like you and me. They get to review hundreds of business plans for new products and services every month, most of which never see the light of day, let alone a term sheet. That experience gives them insight into trends and a startup's possibilities. They can tell the difference in a PowerPoint deck between a product and a feature by slide two, and whether either it has a snowball's chance in hell of succeeding.


Hand over the cash. Please.


I've always wanted that VC advantage, to see a myriad of business proposals and get some inkling about what was going on with startups. That's why I spent so much time interviewing new companies when I was writing "On the Mark" for a half dozen years at Computerworld. I guess delusional people intrigue me, which explains why I'll chat happily with those wide-eyed religious people who drop by unbidden to my door.


Well, I've found a place where I get that inkling into the startup marketplace. YouNoodle.com is an aggregator Web site that gathers information about companies that are, in most cases still in or barely out of beta with their products (or features). In fact, its own product is still in beta.


Most helpful is its YouNoodle 500 list, which ranks the buzz around some of the hot new firms, largely in the IT market. It uses some sort of Google-like algorithm to create its list of noteworthy companies. It also lets those companies post information about themselves on its site, giving a visitor a decent central location to discern whether the startup is worth further exploration.


My only problem with YouNoodle is whether it's a product or a feature. I know if I ever chat with its CEO Bob Goodsen he'd likely tell me it was a platform. Naturally, I'd think him a tad delusional. But it is an interesting company. One to watch.


Although, when I looked at the  YouNoodle 500 about YouNoodle itself last week it had dropped quite a few points in its own ranking, which, on second thought, impressed me with such an honest, open assessment.


Maybe they aren't so delusional at YouNoodle after all.