Mark Gritter (markgritter) wrote,
Mark Gritter

Second thoughts on Project Skyway selections

After mulling over my breakdown of the Project Skyway selections, I believe there are three areas where I could expand a bit on my thinking.

(1) Game startups. I hardly ever see these as a good idea. Game development seems like a bit of a crapshoot; even great execution doesn't necessarily get you the market traction you need for a success. And to make a successful long-term studio you need to repeat on your good luck more than once, or have a hit so huge it can give you a big cushion. The exceptions seem to be companies that are first movers into a particular space (e.g., Facebook games).

Exits through talent acquisition might be more common, but these are rarely wins for investors.

Am I wrong on this? Do game startups have a well-defined path to long-term growth?

(2) Education-related startups. The high bit here is that schools do not have money, particularly now. So anything that doesn't immediately save money is a nonstarter. Postsecondary is a slightly different story (I just don't believe in the niche those two companies are trying to target). But K-12 schools are a crappy revenue source even in the best of times.

I did list ArtsApp as an idea I believed in, but the differentiator in my mind is that they're trying to bring SaaS to a function that the schools involved have to do anyway, so if they can eliminate an administrative position (or even a temp) needed to handle the applications, it's a clear win for the school.

(3) Attempting to insert yourself into existing cash flows/business relationships. It's tempting to look at a pile of cash and say "if I can get just a little slice of that, I'm golden." But I think the more successful path is to create a new relationship and exploit that, rather than trying to get between a company and its existing vendors or customers. EBay is a great example of the former path. ServiceMagic, MinuteBids, and similar sites can succeed where one party or the other are relatively unsophisticated--- small contractors, individuals and small businesses who don't have the resources to locate vendors, get good cost information, and build relationships. But a company like Qualtrx (sorry to pick on them) seems like it is trying to enter into a market where both vendor and purchaser are more capable and have a long-term relationship.

I am also a bit concerned that the MN startup community (particularly around MinneDemo/MinneBar) has too much of a "Minnesota nice" attitude, which makes it hard to just come out and say that local startup A, B, or C is a Bad Idea. But when the pool of local investment and attention is small, I think that sort of criticism is even more important. (Maybe I just need to expand my blogroll to include more contrarians. Searching for post-MinneDemo blog entries hasn't turned up many, though.)
Tags: minnesota, project skyway, startup
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