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Why You Should Start A Business In Recession

One of the advices that seems to come from everywhere with regards to recession is to lower your customer acquisition cost because the lifetime value of the customer is going to be lower than before. Of course this makes sense. There will be behavioral changes in the purchasing patterns as well as cut in spending. This will make your customers less valuable for you than before.

However, when the customers are spending less, and the businesses are paying less to acquire them, it makes customer acquisition cheaper for all businesses. Sure, they are cheaper to acquire because they are less valuable, but you are being given a one off opportunity when it’s over-all cheaper to start your business.

The cost to start a new business is significantly lower during a recession.

If you’re not VC funded but bootstrapped like me, this means a great deal. We’re already planning some e-commerce stores and hoping to schedule the launch right when the markets are in deep turmoil.

Getting A World Class MBA For Free

I neither have the time nor the money to go through a traditional MBA. Instead, I’ve been doing this new kind of MBA for the past many weeks that I’ve found quite interesting & informative.

I’ve no way to gauge the actual value in comparison to the traditional MBA but since my teacher (Fred Wilson) is a venture capitalist for more than 3 decades, holds a world-class traditional MBA himself from UPenn, and is an early stage investor in many world-class companies including Twitter, I’m more than happy to learn whatever I can at my own schedule and without incurring any cost.

Most entrepreneurs and company founders are never going to need an MBA, but they are going to need to know bare bones of whatever is taught in an MBA.

This is great for that.

Do We Choose Grey Hat, Or The Grey Hat Chooses Us

I met this guy in 2009. That’s 11 years ago. He always wore a hat. He loves them.

He taught me how the systems are gamed. I loved it. We were on the Digg’s front-page everyday. We worked for the top guys. I will probably not name them today. May be they don’t want to acknowledge they gamed the system too.

The system was nothing but a recommendation engine. One of the first I had seen. When Twitter and Facebook ranked posts chronologically, Kevin Rose had the recommendation engine figured out. We just knew how to make the best use of it. Reverse engineering it, I would say.

One of our clients in the sports niche got acquired for $150 million dollars. Almost all of our clients are a multi million dollar properties today.

We even made some of our own tiny sites that we drove from Digg.

Over time, struggling between gaming the system for growth, solving an actual problem or doing both at a time, 2020 came.

Today, I’m wondering, how do you build a global business from Pakistan that could one day grow large enough?

How do you hire white people or black people or asian people or anyone to cast them in your ads? Can you? Are there any in this country? If yes, are they actors? They probably aren’t and you probably can’t.

You could outsource though. For tens of thousands of dollars perhaps? Or millions of Pakistani Rupees that you can most likely save in 5 years working in a day job.

If you’re bootstrapped, which you most likely will be because there aren’t any VCs here, what would you do? Would you get that ad made? Or would you pick a hundred ads from the internet, break them apart, and stitch them enough times that they qualify for “fair use” and become DMCA-free. This would probably cost you $50.

Forget about the ads. Not all businesses advertise and advertising could be just one of the many things about building a business. You will most likely require certain kind of digital infrastructure for sure. PayPal? Ability to accept cards i-e payment gateways? But there are none that support this region. What do you do?

You could fly to US or another supported region, setup a company, and use that to setup the rest of the digital infrastructure. But most likely you’ll never get a visa and you probably also can’t afford this travel easily. If you think I’m exaggerating, I know at least 5 tech entrepreneurs from Pakistan who have built multi million dollar businesses but were declined US visit visa.

May be you could fly to one of 31 visa free countries? But they are just as good as your own country as far as the digital infrastructure and access to business tools is concerned.

You could reach out to friends or relatives in US and form a company in partnership with them. You could use that company to setup PayPal, payment gateway and other business tools that you need to begin your business.

But there’s more. You will most likely be banned at some point once you access these business tools physically from within Pakistan.

What do you do then? You could rent a server physically in US. Remote Desktop Protocol. You could access that server remotely and run your business on that. Sounds sketchy, doesn’t it?

But you could get banned for that too. Because it’s not that big of a deal for these multi billion and trillion dollar companies to understand the difference between a data-center’s IP and that of a home in US.

So may be you could buy a Raspberry Pi that you could physically place in someone’s house in US. I’m confident none of my friends or relatives would agree to this. It would seem strange to them that why would someone want to do it? They would think that there could be something malicious going on that could land them in trouble.

You could also buy a laptop and physically place that in their houses and run your businesses with remote access. I know my cousins aren’t going to like that idea. May be yours do.

By the time you would come this far, you would have exhausted 83% of your energies in setting up the the foundation to start your business.

Thousands of entrepreneurs from Pakistan actually have to go through all of this (and more) to actually start their businesses. May be you see a scammer, but I see a victim that turned around his fate and became a hero.

So what happened there? Did we choose that grey hat, or did that grey hat choose us?

How VC Funding Can Kill Innovation

A few days ago, I published a blog post about my views on the future of the open internet. The post mostly focused around Twitter which went from being a very open platform to becoming a very centralized platform completely killing 3rd party apps that it stole innovation from. I believe all these decisions were financial and were driven by pressure from the investors.

Twitter & 3rd Party Apps

A lot of features that we see today on Twitter were actually originally developed and created by 3rd party apps. In fact, the first twitter client for both Mac & iPhone were developed by 3rd parties. Some of the clients got acquired by Twitter including TweetDeck & Tweetie. TweetDeck’s support was killed from all platforms except for Mac. Thousands of other apps were ruthlessly killed by discontinuing API supports.

Financial Decisions

Twitter said the decisions were made to discontinue support for “legacy APIs” at the same time acknowledging that no new APIs will be created. In my opinion, the decision was a financial one, and largely driven by what the investors wanted off Twitter.

Fred Wilson, a VC who invested early-stage in Twitter said in a blog post he wrote in 2016

In the early days of Twitter, there were third party applications (Summize for Search, Tweetie for iOS client, etc). These were all built on Twitter’s API. If Twitter had imagined itself as a protocol instead of an application, these third party applications would not have had to compete with (or get bought by) Twitter. But at the time, there wasn’t an obvious way for Twitter’s founders and management team to benefit from a protocol-based business model.

Fred Wilson

Posterous & Twitter

But the damage wasn’t limited to Twitter clients. Twitter acquired and closed other services too.

Posterous was an ultra-simple blogging platform with focus on social media integration and ultra-easy mobile blogging using emails with support for many forms of media.

Posterous grew at a very fast rate and had over 15 million users by 2012. They ran a wide-spread campaign asking users from smaller or dying platforms to import their blogs to this new dead-simple platform. Anyone who did that most likely regretted that decision as Twitter acquired Posterous in May 2012 only to shutdown the blogging platform, and all blogs hosted on it in the next 6 weeks.

All for financial reasons.

It’s Not Twitter

I don’t hate Twitter. I love it. But everything that Twitter has done was done in the financial interest. And somehow I don’t think it is what Jack wanted off Twitter. If he did, he would have had built Twitter like this from ground-up. But he didn’t. Because he had different plans for Twitter. Plans that obviously changed as financial concerns got in to the picture.

And it isn’t Twitter alone. I only expressed my thoughts with reference to Twitter in continuity of my original post about the open internet, which was also written with Twitter in mind.

All large tech companies have killed platforms and services, acquiring only to shutdown, for financial gains.

And while it looks sexy to say that we’re trying to change the world, with decisions like these we’re actually just trying to change our own lives and those of our investors’. As killing innovation isn’t how you change the world.