A couple of new reports out give some insight into the hot regions for entrepreneurs and the hot markets that VCs are beginning to bet on for the future.
Knowledge@Wharton looks at some of the hot markets of the future. Energy, water, personalized healthcare, and biotech are all on the watch list.
For hot cities, check out the newest ranking of 2007 Entrepreneurial Boomtowns from Inc. St. George (UT), Yuma (AZ), Prescott (AZ), Fort Myers (FL), McAllen (TX), Naples (FL), Las Vegas (NV), Sarasota (FL), Morgantown (WV), and Bend (OR) top their list this year.
(from National Dialogue on Entrepreneurship).

We are just beginning to see what intriguing opportunities may be around the corner thanks to Web 2.0. I have seen many of them popping up at business plan competitions. A couple of new examples of collaborative services, which are a big part of Web 2.0 activity, have recently come across my desk.
One is called Huddle, which came to me thanks to Natalie Wozniak (an alumna from my University of St. Thomas days) via PSFK:

Huddle has been targeting freelancers, small marketing and creative agencies as well as law firms.
A really interesting fact is that they did not built the app inhouse but managed to bond with a partner and have it developed within four months which is quite unusual for a Web 2.0 startup. But we learned that it works rather well for them and they even managed to receive funding from an angel investor. Huddle now has around 1,500 users from 250 companies.
Huddle is an application that seems to fit perfectly into a business world were constantly changing teams and long-distance collaborations are getting more and more common.

The other is called PartnerUp, was just launched within the last few weeks. From Mike Anderson, Senior Information Architect:

PartnerUp is a free online service which helps entrepreneurs, small businesses, and people who have an idea or are interested in starting a business find business partners, advisors, board members, executives, and skilled professionals. And, the web site helps those who are interested in getting involved in businesses find opportunities to get involved in the above capacities.
Basically, our goal is to help people who have ideas but need people with certain skills or experience find the people they need to make their idea a success.

What excites me about start-ups in the Web 2.0 space is that many of them have the promise to have both good revenues and healthy cash flows. Plus, they require much less start-up capital than most of their Internet ancestors.

Entrepreneur magazine has released their annual ranking of franchises for 2007. You can find it here.
I wrote a post last year on the pros and cons of buying a franchise. You can find that post here.

I had no intention of having a theme week dealing with “when lightening strikes” stories about small businesses, but just could not resist one more story in this vein.
The pet food scare has created a boom in business for small pet food companies that manufacture all natural products.
From TwinCites.com:

In the month since the recall, Pet Chef Express [in the Twin Cities] added 150 accounts, increasing its customer base to 1,100 pet owners. The small business’s typical weekly sales of $2,000 to $3,000 almost doubled in the past few weeks.
Kukla can barely keep his warehouse stocked. The 1,300-square-foot room sat more than half-empty Tuesday. To meet the demand, Pet Chef Express broke ground this week on a 2,100-square-foot warehouse in Lakeville.

So let’s recap some of the lessons from the posts this week on what happens to small companies that have a sudden boom in demand:
– Publicity is one of the most powerful forms of bootstrap marketing for a small business. Just ask the folks at SeeMore Putter and Bamboo Comfort.
– But if you don’t meet demand, the benefits of the publicity soon vanish, and you run the risk of alienating even your most loyal customers. This includes those from before your “fifteen minutes of fame.”
– While meeting your new-found demand, you have to balance opportunism with realistic caution. I hope that demand for the pet food in today’s example will continue. But this can never be assumed. Pet Chef Express must work deliberately to build loyalty from new customers who certainly came to them in some cases out of desperation. Their marketing plan must now include tactics to lock in their newly expanded customer base, and build on the sudden windfall that the national news story has brought to businesses like theirs.

MIT’s Technology Review offered its Top 10 Emerging Technologies Trends for 2007 in an article from last week. This year’s emerging trends includes:
– optical antennas — a basic technology with potentially broad applications
– metamaterials — another basic technology with potentially broad applications
– peer-to-peer video — help save us from a bogged down Internet from the growth in video on the web
– personalized medical monitors — can help to “simplify and improve medical diagnoses”
– compressive sensing — “revamp digital imaging systems in cameras and medical scanners”
– nanohealing — nanotechnology application for medicine
– quantum-dot solar power — nanotechnology application for solar power
– neuron control — might “help physicians fine-tune treatments for brain disorders such as depression and Parkinson’s disease”
– single-cell analysis — could “lead directly to predictive tests that could help doctors treat cancers more effectively”
– mobile augmented reality — combines “location sensors and advanced visual algorithms with cell phones…to help us figure our where we are”
(From the National Dialogue on Entrepreneurship).

There has been a lot written over the past month on Jeff Bezos’ plans for Amazon. As Bezos explained to Business Week when he first unveiled his plan, he wants to transform Amazon the on line store into Amazon the engine of the entrepreneurial economy.

Bezos wants Amazon to run your business, at least the messy technical and logistical parts of it, using those same technologies and operations that power his $10 billion online store. In the process, Bezos aims to transform Amazon into a kind of 21st century digital utility. It’s as if Wal-Mart Stores Inc. had decided to turn itself inside out, offering its industry-leading supply chain and logistics systems to any and all outsiders, even rival retailers. Except Amazon is starting to rent out just about everything it uses to run its own business, from rack space in its 10 million square feet of warehouses worldwide to spare computing capacity on its thousands of servers, data storage on its disk drives, and even some of the millions of lines of software code it has written to coordinate all that.

Here is how the Bezos plan was described in USA Today:

That’s the future Amazon.com CEO Jeff Bezos hopes to set in motion with the company’s new direction. If you tease out Bezos’ plan, you get to a point where a high school cheerleader sitting at home with a laptop could theoretically harness computing power, design capabilities, manufacturing and distribution from around the world, and make and market a cute little pink hot rod that would compete against General Motors.

Now that the ink has dried on Bezos’ plan, I’d like to offer my take on it. His assumptions show that he never learned one of the most important lessons of the dot.com disaster. He does not seem to understand that markets really matter. For example as Pets.com illustrated, just because you can sell dog food through the Internet it does not mean that there is a market for such a service.
Starting a successful business has two critical pieces. First you need a viable product or service that you can deliver. That is the part that Bezos is focusing on.
But second, you need a large enough market willing to spend enough to cover your costs and leave you a profit. The dot.com kids only worried about the first part and never paid much attention to generating sales and profits. Just because we can enable a “high school cheerleader sitting at home with a laptop could theoretically harness computing power, design capabilities, manufacturing and distribution from around the world, and make and market a cute little pink hot rod that would compete against General Motors” does not mean there are customers for her product.
I hope we are not setting people up for even bigger failures by making part of the process so much easier. My fear is that it will encourage more people to ignore the customer part of the equation and start businesses that are doomed to fail.