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How the Dotcloud Affects the Need for Startup Funding | @CloudExpo #Cloud #DataCenter
The shift toward the cloud and as-a-service has lightened the load for startups
By: Dan Blacharski
Sep. 6, 2017 12:00 PM
How the Dotcloud Affects the Need for Startup Funding
When you decide to launch a startup company, business advisors, counselors, bankers and armchair know-it-alls will tell you that the first thing you need to do is get funding. While there is some validity to that boilerplate piece of wisdom, the availability of and need for startup funding has gone through a dramatic transformation over the past decade, and the next few years will see even more of a shift.
A perfect storm of events is causing this seismic shift. On the macroeconomic side this storm includes the still-persistent repercussions of the Great Recession, historically low interest rates, and uncertainty about global commerce and trade. On the technology side, still more realities add to the perfect storm, including the increasing popularity of as-a-service options, which make it easier for startups to launch with no on-premise equipment requirements and possibly no physical office at all, and development platforms that streamline the need for original development work.
This perfect storm is what Cloudipedia defines as the "dotcloud boom," or "the emergence of a new class of born-in-the-cloud startups which are driven by an imperative for speed, convenience and personalization on the part of the consumer, and which are built on as-a-service infrastructure, software and development tools that allow a more agile startup cycle with low initial capital requirements."
Historically low interest rates may be great for larger and better-established businesses, multinationals and Fortune 500 companies - and perhaps a few serial entrepreneurs who know the secret handshake - but small businesses and startups don't usually share the benefits enjoyed by the giants of industry. During times of lower interest, banks don't want to make business loans of less than $1 million, simply because those loans are no longer profitable.
There is no more easy money
That golden era of easy money is over. Startups received less venture money in 2016 than in 2015, and venture capitalists, PE firms and angel investors are still active, but that brief era of irrational exuberance and loose money is over. Those investors are requiring more due diligence and more complete planning on the part of the startup, realizing that even the greatest idea in the world is worthless without a solid an actionable plan for execution. Ultimately the fact that these venture investors are rolling up their sleeves and imposing a steeper set of requirements of entrepreneurs is a positive move - it means those entrepreneurs will have a higher success rate, and the industry will see less clutter of ideas that were doomed from the start.
Enter the new age of the lightly funded startup
The shift toward the cloud and as-a-service has lightened the load for startups, which instead of having to build their own data centers at great expense, can spend minimal funds to utilize a data center in the cloud. Typically those cloud-based data centers are more state-of-the-art than could be achieved in an on-premise environment, are more secure, and are staffed 24x7 by highly skilled personnel.
"We're seeing more startups today successfully launching with significantly less money," said Jason Williams, CEO of Loan Cheetah. "While funding from venture capitalists and traditional banks may be less available, dotcloud startups are finding that multi-million dollar funding is no longer necessary, and are instead opting for a lightly-funded model, often turning to self-funding or alternative non-bank funding sources to get started." Requirements for a title loan are minimal, according to Williams, as are other non-bank alternatives such as peer lending or crowdfunding, which are done on more of a person-to-person basis rather than facing less flexible underwriting requirements imposed by traditional lenders.
Today's dotcloud startups are doing more with less - part out of necessity due to a lack of available capital, and part due to the fact that the building blocks of new business are now available to purchase on a subscription basis from established providers.
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