Issues in Website Entrepreneurship
by Eric Schlachter, Esq.
Cooley Godward Castro Huddleson & Tatum
1. Establish Your Business Objectives. Do a business plan. Articulate your strengths, weaknesses and plans. Define the market you are in and what the competitive forces are in that market. Think about the ways your competitors can replicate your unique, special and different features, and how you are going to respond.
* Why are you going online? Is it for money, or for other reasons?
* What is your franchise, and how will you exploit it? What makes your site unique, special or different?
* Take your projected revenues and discount by 4; double your projected costs. Will you still make money?
* What is your exit strategy?
2. Determine the Platform.
A. The Web.
Pro Con
Multimedia Capabilities High user hardware requirements
Explosive growth Small user base
GUI Poor indexing
Complete site control In the future, high maintenance requirements
No secure transactions standard
UNIX vulnerable to hacking
B. Commercial Online Services.
Pro Con
Established creation tools Diminished control over site experience
Built-in user base Proprietary access
Secure transactions Service will expect percentage
C. BBS or telnet site.
Requires more user technical savvy.
Heavy marketing investment required to pull in users.
May also require a subscription revenue base.
3. Financing Sources.
* Compatibility with your partners. Are you prepared to give up control?
* Bootstrapping is attractive but dictates slow growth, little discretion over business
* Venture capital is HOT HOT HOT, but has significant downsides
* Angel money is ideal, but difficult to find
* YOU MUST WATCH STATE SECURITIES LAWS!!
4. In-house v. Outsourcing.
Where is your franchise? Where is your expertise? How will you prepare for changes in the market or technology?
* Telecom connection
* HTML mark-up
* Design/graphic arts
* Server programming (UNIX…and Java)
* Hardware
5. Site Content and Design.
* Organization sells
* Superior content stands out
* Graphics are nice, but aesthetics v. utility tradeoff
* Server connect times
* Avoid dead sites. What is your ongoing enhancement strategy?
* Capturing a niche can be extremely rewarding, but may also require heavy investments
* Intellectual Property issues
– Who owns your content?
– How to protect your content from expropriation
– Domain Names and Trademarks
6. Legal Issues.
* If you are providing your own content, you are a publisher!
* Interactivity raises the difficult question of when you will be liable for the statements and actions of your users
* Software distribution raises commerce (including tax) and exportation issues
* Watch out for nasty obscenity/pornography laws
* Disclaimers may not be enforceable
* Lurking issue: when do the most restrictive laws apply?
About the speaker: Eric Schlachter is an attorney practicing in cyberspace law with the Silicon Valley law firm of Cooley Godward Castro Huddleson & Tatum. He has a law degree and an MBA in Entrepreneurial Finance from UCLA. He is an adjunct professor of Cyberspace Law at the University of San Francisco School of Law. He can be reached at schlachtere@cooley.com or (415) 843-5154.