LILO Start-Ups
Josh Quittner wrote an article in Time Magazine about a month ago on the new internet boom and LILO (“Little In Lots Out”) startups which I read with interest, because it seemed to confirm what I had been seeing and hearing as I was doing my due diligence before launching Free Vector. While outside funding for new ventures may be tight, there are a lot of smart people out there with some very good ideas that due to economic circumstances have more opportunity to spend time turning the ideas into viable business opportunities.
The general gist of a LILO start-up is essentially find a good idea, jump in and get your hands dirty. The article points to several examples of successful start-ups that cost less than $10,000 to get off the ground. All of the examples cited are internet-based businesses which can utilize the exponential growth potential offered by the web with minimal investment in infrastructure.
Why the boom in these low-cost start-ups? The article cites the low cost of failure in a bad economy:
” . . . a bad economy is the LILOpreneur’s friend. Ito likes to say, “The cost of failure is cheap. It’s so low, you can swing the bat way more times.” In a bad economy, no one really notices or cares about more failure. That creates a better environment for risk-taking, which is the only way innovation occurs.”
The concept resonates particularly strong for me personally — my wife and her business partner are in effect “LILOpreneurs”, offering math “crates” filled with easy, ready-to-use games and activities that reinforce math concepts for grades K-8. (Check out their current website at www.mangomath.com, a new e-commerce site is in the works with an official launch due early June). Their effort to date has involved a lot of intellectual capital with an extremely modest cash investment. They also utilize a lot of low- or no-cost hosted technologies for their website, collaboration workspace and back-office operations, which I plan to delve into a bit further in subsequent posts.
Do you still need a business plan for a LILO start-up? Absolutely. Does it need to be the same plan you would put in front of an outside investor? No — but you still need to do enough work upfront to understand the market, competition, value proposition and the amount of initial investment required to get you to what the article refers to as “ramen profitability”.
