Internet startup not so costly

Free Web programs let entrepreneurs launch ideas with little cash

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April 05, 2007|By Eric Benderoff | Eric Benderoff,Chicago Tribune

CHICAGO -- Scott Robbin has a big idea for how people can use their mobile phones to read news stories, visit social sites or just browse. But he lacks a big bankroll for his startup, Tappity.com.

That's not the problem it once was, though, as Robbin and his partner, Jeff Skinner, are using free Web-based software tools to develop, tweak and get feedback from the 1,000 or so people who have signed up to use the program since its introduction a month ago.

The cost to launch the startup? About $125 a month for Web hosting, plus the evening and weekend time Robbin, 31, and Skinner, 32, have spent building the program while they keep their day jobs.

Ten years ago, such a venture would have cost roughly $5 million to $10 million just to get the technology, such as servers and a fleet of software developers, before an entrepreneur could get an Internet company off the ground. That figure doesn't include advertising, marketing, managing personnel or payroll, costs that led startups to spend many more millions of dollars before proving they had a viable business.

"The technology was just emerging, and you had to spend a lot of time and effort to get the core infrastructure to work," said Matt McCall, a managing director for Portage Ventures Partners of Northfield, Ill. "Then you would see if the dogs would eat the dog food."

Now, thanks to free or inexpensive Web-based programs, entrepreneurs can be up and running all but after hatching the idea.

The programs include software for project management to note changes and collaborate with others; invoice management to help keep track of billing; Web conferencing to converse with customers; and printing services to make sure a key presentation is bound and shipped to potential investors for morning delivery only hours after completion.

Even executives from the dot-com heyday of the late 1990s are using Web-based tools to launch new ventures at sharply reduced prices.

"You can be up and running in less than a week with world-class software," said Internet veteran Matt Moog.

Moog has done just that with his new venture, Viewpoints.com, a site expected to launch this month or next.

Viewpoints, a user-generated review site, has backers, but the level of investment is dramatically smaller than in 1996, when Moog was the fifth employee hired at CoolSavings.com.

That site, which helps consumers save money by providing coupons for everyday goods such as diapers or olive oil, burned through roughly $100 million to build the business.

Moog was appointed chief executive of CoolSavings in 2001, the same year its stock was delisted from the Nasdaq exchange. Moog left CoolSavings, now a part of a private firm called Q Interactive, on good terms in July.

Two weeks later, he launched Viewpoints and had $4.8 million in funding and a team in place by the end of September.

Those startup costs are a fraction of what they once were, Moog said, because "a lot of the complexity has been removed" from starting a company.

For example, "We don't have a server," he said. "At Q Interactive, we had a person running the server full time."

The simplicity of doing everyday business functions has been most helpful to Moog.

"The way I've been doing accounting and bookkeeping has been phenomenally simple," he said. "It takes about three hours a month, and I can produce professional-looking reports at the end of each month and send it off to the investors."

In addition, he said, "we're hiring fewer people, we spend less on hardware and we have less overhead. And you can have a more powerful end result."

Much of the software he uses is accessed through a Web browser and not downloaded onto a computer. That is far cheaper than acquiring software licenses for each employee, which can cost thousands of dollars a month, Moog said.

Robbin and Skinner are using a combination of programs and some homemade software code to launch Tappity.com. Tappity is an application to find mobile-friendly Web sites, share discoveries with other users and organize favorite sites.

It's free and works on any Web-enabled mobile phone.

Building Tappity "wasn't much of a risk financially," said Robbin, of Chicago. He and Skinner, who lives in Iowa City, Iowa, "have been developing it for about five months," he said.

"Just on nights and weekends, whenever we could fit in some programming," Robbin said. "But it's not like opening a retail storefront that would cost tens of thousands of dollars. Our biggest cost is the Web hosting."

Eric Benderoff writes for the Chicago Tribune.

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