Tag Archives: startup

The dangerous mystique of the “open data” business

I’m frequently asked by people about how they can start an “open data business.” Let me first say that I love that the question gets asked. I love that people are interested in Open Data. I love that people want to learn more, they want to play, they want to think of ways of creating a company. These are, in part, signs of how far the open data discussion has come – people see it as a resource that they would like to leverage.

It is, also, the wrong question.

This is not to say there are not businesses that use open data. Indeed, a vast number of companies use open data (anyone company using census data for even a tiny part of their business qualifies). Nor am I denying there aren’t businesses built primarily with open data – the Open Data 500 list demonstrates there are. Plus I get introduced almost daily to businesses that are: both Ajah and OpenCorporates come to mind (I have donated advice, but have no financial connection, with either).

The Trap

But from a founder (or, I suppose, investor) perspective there are dangers to thinking about “open data” as a unique business space.

The danger is in failing to understand there is virtually nothing that distinguishes an open data business from any other business. Any business needs to solve a real (or sadly, at times imagined) problem, it needs to find clients (e.g. people willing to pay for that solution), and it needs to execute on a number of other things at least competently (HR, marketing, management, cashflow, etc…).

The danger with putting the words “open data” before the word “business” is that it risks making people think Open Data businesses are somehow unique. They are not. If there is a gapping chasm between the question of “what can I do with software” and “how can I create a viable software company” there is an equally large gap between “what can I do with open data” and “how can I create a viable company using open data.” And the questions you need to ask yourself to figure out that latter question (many of which are nicely laid out in this book) are independent of whether it is a software, hardware, crafts or open data business.

Indeed open source software space gives us a nice analogy. I suspect few people decide to create an open source software company – they decide to create a company and the software license is a reflection of their strategic options. I think it is the same with open data. You don’t start a company saying “let’s use open data.” You start a company to solve a problem, of which using or publishing open data may be the only, or the most strategic, way of doing this.

The Opportunity 

Some readers may be surprised to see me write this. I am, and continue to be an advocate of open data. But open data is not some magic pixie dust that causes normal business logic to disappear. And it is not that I think people are saying that per se, it is just that I want them to understand that the 99% of the problems that needs to be solved in an “open data business” lie in the third word of that string, and that while the first two do confer some unique advantages and disadvantages, these are relatively trivial.

The real opportunity of open data lies not in the way it creates a new unique type of business, but that it offers a new set of cheap building blocks by which to try to solve problems. In other words it increases the diversity and, lowers the cost of, inputs.

Here again the world of software is instructive. The Economist’s recent survey on Tech Start Ups talks of a Cambrian Explosion because of the availability of “Cheap and ubiquitous building blocks for digital products…” many of which are (and many of which are not) open source. The cheap availability of these building blocks is allowing for a range of experimentation that was previously not possible, or at least, prohibitively expensive.

Open data – whether as an input for software products and services, for analysis (journalistic or corporate) or for scientific research – is cheap (in theory free) and increasingly plentiful. It has the possibility of thus being the equivalent of the cheap code that is powering a great deal of experimentation in the world of software. As an open data advocate the possibility of this increased experimentation has me excited.

Conclusion

So if you are thinking about starting an open data business – that is great! I’m excited to hear that and I am keen to help and be supportive. But focus on that third word – business. That’s the one that really matters.

From a data perspective you should be asking yourself – what real tangible pain does doing something with this data set help me solve that was previously only possible with a more expensive input (e.g. proprietary data) or not possible at all. The second is to think of the impact of using open data on your strategy. Where does it leave you more vulnerable (too copy cats or the whims of the data publisher) and where does it leave you stronger (if the data is commoditized then the axis of competition will lie in other parts of the business).

I hope this is a helpful nuance to the issue of open data businesses, and some helpful input for those looking at open data and thinking about to find business opportunities in it.

Should we Start a Government as Platform Business Association

I have an idea.

I want to suggest starting a community of disruptive software companies that are trying to sell products to local and regional governments. I know we can make cities better, more participatory, more accessible, to say nothing of saving them money. But to be effective I think we need a common message – an association that conveys why this disruption is in government’s interest, and how it will help them.

Here’s why.

Last year, I along with some friends, incorporated a small company with an innovative approach to messaging that helps cities be smarter, communicate better and serve their citizens more effectively.  Where we deploy, citizens love us. It’s a blast to do. (You can read more about our company here – if you work for a local or regional government, I’d love to talk to you).

We also don’t think we are alone. Indeed we like to think we are part of a new breed of start ups – companies we respect like SeeClickFix, Azavea  and Citizenvestor – whose DNA is influenced by the likes of Tim O’Reilly and others who talk about government as a platform. Companies that believe there are hyper low cost ways to make local government and services more transparent, enable citizen participation and facilitate still more innovation.

Happily we’ve had a number of early successes, several cities have signed on with us as paying customers. This is no small feat in the municipal space – governments, especially local governments – tend to be risk averse. Selling software as a service (SaaS) for a product category that previously didn’t exist can be challenge. But it pales in comparison to the two real challenges we confront:

1)   Too Cheap to Buy

For many cities we are, weirdly, too cheap  to buy. Our solution tends to cost a couple of thousand dollars a year. I’m talking four digits. In many municipalities, this price breaks the procurement model, which is designed for large purchases like heavy equipment or a large IT implementation. We’re too expensive for petty cash, too cheap for a formal process. I’ve even had a couple experiences where a city has spent significantly more money in staff time talking to and evaluating us than it would have cost to simply deploy us for a year and try us out. We need a smarter context for talking to procurement specifically, and local government in general. That might be easier in a herd.

2)   Marketing

As company that tries to keep its product as cheap as possible we have a limited budget to invest in marketing and sales.  We could charge more to pay for that overhead, but we’d prefer to be cheaper, mostly because we don’t believe taxpayers should pay for the parts of our business that don’t really give them value. In short, we need a better way of letting cities know we exist, one that is cheap and allows our product to reflect its value, not an advertising budget.

As I look at our peer group of companies, I have to believe they share similar challenges. So why don’t we band together? A group of small companies could potentially do a virtual trade show that not only could attract more clients than any of us could on our own, but would attract the right clients: local governments that are hungry for next generation online services.

So who would I imagine being part of this association? I don’t think the criteria is complex, so here are some basic ideas that come to mind:

  • Software focused
  • Disruptively low or hyperlow-cost: here I imagine the cost is under 35 cents per citizen per year.
  • Following a SaaS or open source model
  • You keep the barriers to entry low – any operational data your system creates is open and available to staff and, if requested by the city, to citizens as well
  • Citizen-centric: In addition to open data, your service should, whenever relevant or possible, make it as easy as possible for citizens to use, engage or participate.

Is it the Government as Platform Business Association? Or the Gov 2.0 Software Association? Or maybe the League of Awesomely Lean Gov Start Ups. I don’t know. But I can imagine a shared branded site, maybe we pool money to do some joint marketing. I love the idea of a package deal – get Recollect, SeeClickFix and OpenTreeMap bundled at a discount! Maybe there is even a little logo that companies who meet the criteria and participate in the group could paste on their website (no worries I’m not a designer and am no attached to the mock up below).

Gov20-bia-logo

The larger point here is that if the next generation of civic start ups – companies that can do software much, much cheaper while enhancing the experience for city staff and residents – have an education challenge on our hands. Cities need to learn that there emerging radically small, lean solutions to some problems. I’m not sure this is the right answer. I know this proposal creates a lot of unanswered questions, but it is an idea I wanted to throw out there.

If you have a company that fits the bill I’d love to hear from you. And if you work for a local or regional government and think this would be helpful, I’d love to hear about that as well.