Tuesday, July 3, 2007

eCloudM the beginning

In mid-2006 I was starting to get that entrepreneurial feeling again. One year earlier, in August of 2005, we had completed the sale of the company I helped to found. All the way through the summer of 2006 there was tremendous focus on integrating our product lines. However that effort was coming to an end and I was starting to wonder about what was next.

About that time Mike Hill and I were re-introduced by a mutual friend, our lawyer David Steigerwald. Mike Hill had recently left the COO position at XAware, an XML Integration company he helped start. During some initial meetings Mike and I realized that we both had a passion for technology, entrepreneurship and good Irish beer.

We both knew that we wanted to start another company sometime in the future. Mike had done two successful startups and I had done one and been involved in another. That said we also knew that we did not want to do another startup similar to our previous companies. We started the process of figuring out where to look by creating a list of what we didn't want to do.
  • We had no interested in trying to sell complex and expensive software to enterprises.
  • Trying to create another Open Source version of a successful software product and charging some combination of service and support fees did not seem like our bag of tea.
  • If possible we wanted to avoid the typical software company path of Idea --> Seed Capital --> Angel Investors --> Venture Round 1 --> Venture Round 2 --> Debt Financing --> Merger --> IPO/Out of business/Sell out.
We also had a few ideas that we did want to do.
  • Explore the feeling that something, we were not sure exactly what, but something was happening out there on the Internet that seemed ... different.
  • Get a better feel for how low the barriers to entry for software products was becoming due to technologies like AJAX, GWT, Web Services, OnDemand software, and better development paradigms.
  • Work with new media technologies like Blogs, Online Advertising and Community Networks to gain a better understanding of what it takes to build value in today's Internet.
  • Figure out if it was feasible to create a relatively virtual organization using the mushrooming set of online communication applications like Skype, Google Talk, GMail and Google Desktop Apps.
It ended up that the exploration and discussion around exactly these topics led us to that "something different" we thought was happening on the Internet. Our discussions generated a few conclusions.
  • The barriers to entry in the Enterprise Software space were becoming gigantic. The up-front capital needed to start a company and compete against established vendors was moving upwards of the $50M mark.
  • The ability to create good Internet software was becoming incredibly easy
  • Much of the software market was becoming commoditized. The availability of cheap debt was financing a huge M&A spree, consolidating the Enterprise Software market down to a few Tier 1 players, and a slightly larger set of Tier 2 organizations.
  • Companies like Google, eBay, Amazon and Yahoo were bringing an incredible array of platform capabilities into the On-Demand/Software as a Service (SaaS) space at very low price points (typically free).
All of this discussion and talk made us realize that the "something big" we were sensing was nothing other than the shift away from Enterprise Software products toward the adoption of On-Demand applications and community focused software. The term we found to describe this new computing platform was the Internet Cloud.

We had found what we were looking for, that shift in the status quo that destroys existing business plans and creates new opportunities. The next question was obviously "what do we do about it".

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