DEMO: State of the Startup

PALM SPRINGS, Calif. — The latest DEMO conference was a paler version of
past events, with far fewer companies participating than in recent years.
Perhaps it was even a surprise to some the show could survive at all, given the
rough economy.

While some 72 companies paid to show new products and services at
the previous DEMO conference in September, there were only 39 at this week’s event in Palm Springs.

Show producer and host Chris Shipley said the tech industry faces “a reset year” that will likely see companies
focus on more pragmatic offerings that have a clear value and revenue model.
She said the days of Internet startups focusing on getting lots of users and
figuring out a revenue model later are largely over.

Given that’s pretty much the model much-admired Web giants like Google
(NASDAQ: GOOG) and Facebook followed, that change in strategy is indeed
significant, if Shipley’s analysis is correct.

But with Google dominating search, Amazon ruling e-commerce and Facebook and
MySpace lording over the social network scene, most startups in those areas would be
hard-pressed to gain a big user following.

“Getting people to change behavior, the sites they’re comfortable with,
in this environment is really hard,” said John Vermaak, an investor with
Tech Coast Angels, told “It has to be something totally revolutionary or a
much better price. The reality today is a lot of companies are probably
hoping Google buys them.”

Green is good to go

Vermaak, who attended DEMO, says he saw a few promising startups and ideas.
One may not fit the mold of “totally revolutionary,” but it does have clear
market objectives. eFormic is promoting a
CO2 code system designed to help vendors verify and promote their
environmental responsibility.

The eFormic label and associated bar code, certifies the company has engaged
in a carbon offset program to offset the CO2 emissions released in making
their product. In one example, eFormic showed how an orange juice company
would add a CO2 neutral label with a code for users to enter at its Web
site. That code would then launch a site giving details on the carbon
emissions and the specific projects the company is sponsoring to offset

In another example, the code on a concert ticket reveals a variety of
projects the consumer can choose from to have the offset funds spent. In the
example shown, “it’s up to me whether I support a solar project in California
or a wind project in India,” said eFormic CEO Pieter van Midwoud.

eFormic says it expects companies across a number of industries to buy into
the program to show consumers they’re being socially responsible.

Vermaak thinks eFormic has its greatest immediate potential outside the U.S., where some countries are either mandating carbon offset programs for many
products or plan to. The U.S. could soon follow.

Annie and Steve’s International Widgets

Tech veteran John Landry said the Internet represents an entirely new
platform for developers, and he expects innovative businesses to continue to
flourish even in a down economy. “You can run a global business,
communicating with customers internationally on a regular basis from your
house in real time,” Landry told “That’s never
happened before.”

Landry runs investment and “business accelerator” Lead Dog Ventures, is a
long time member of DEMO’s advisory board and served as vice president of
technology strategy at IBM from 1995 to 2000. He says the biggest trend in
the computer industry is the move to cloud computing.

“It’s an enormous change for the industry and when there’s disruptive
technology like this, it’s usually not led by the same companies that led
the earlier revolution,” he said. “Once the cloud infrastructure is
established, any number of new services, applications and opportunities are
likely to emerge.”

While the economic downturn is rough for individuals and companies, Landry
also sees an upside. With budgets tight, IT departments are looking to see
how they can best leverage new technologies like cloud services and products
like smartphones and the emerging class of netbooks. And he thinks other
innovative products will emerge to address the new economic reality.

Another industry veteran at DEMO, Mitch Kapor, knows something about
economic ups and downs. When Kapor founded Lotus Development Corp. in the
early 1980s, it was the first popular spreadsheet program for the IBM PC
that basically legitimized it as a business system.

“Lotus was started in the depths of economic despair early in the Reagan
administration,” Kapor told “Great companies can
succeed in any environment.”

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