Doing business without "doing a startup"
I read this article by Mark Suster last night with some disdain. Typical delusions of grandeur tech startup bullshit. I then read this follow up article by Eric Ingram and just had to step in and say my two cents.
It seems as though both of these people have come to the conclusion that you either "do a startup" or you get a job. From what I can gather their definition of a "startup" is an idea for a company which has a high risk of failure and needs masses of investment capital to get off the ground.
Mark's original article starts off:
I was asked by somebody recently in a private message on Quora about whether the individual should leave his comfortable job to become an entrepreneur.
If this was indeed the wording of the question I would say wholeheartedly, and without knowing anything about this person's background or skillset, the answer is "no".
How can I be so sure? Because anyone who says they want to "become an entrepreneur" is completely misguided. Motivations for going into business are many and varied but simply loving the idea of "being a business person" or "being an entrepreneur" is about the worst possible reason I can think of for someone wanting to do so.
Although the original post by Mark Suster starts as a sort of cautionary tale, in fact it turns into another classical romanticisation of the "startup life".
Really, the tone I get from his post is not "think about your personality type and make a decision about whether or not starting a VC funded business is for you", but rather "starting a VC funded business is totally awesome and you're probably not awesome enough to handle it".
There is no shame in being an exec at a company or whatever
Mark Suster, 2011
You heard it here first folks! All of you company executives out there that have been hiding in the closet in abject shame can rest easy tonight.
Listen to David Heinemeier Hansson, people, when he tells you that success in the VC funded "startup" world is like a lottery and people like Mark Suster are lottery winners (the only difference I would point out is that in the world of funding and startups, once you've won once, you're more likely to win again). Would you take advice on how to play the lottery from someone just because they had won the lottery?
Does all this mean that I don't want funding? Hell no, I'm as impatient as the next guy. I'd love funding. I even wrote up an investment proposition and met with people I know in the Melbourne angel investor community.
Getting investment would accelerate development of Decal CMS and get us to market quicker. I even applied to Y-Combinator (needless to say it was rejected). However I have developed a business model so we can move ahead whether we get investment or not (albeit more slowly).
Raise invoices, not capital
A little while ago I watched this interview with Tom Rossi on Mixergy and I commented "In most cases, business is about raising invoices, not capital".
If you can't get funding for your product, is it worthless? Well, have you tried selling it? A product isn't worthless if you can't raise capital - a product is worthless if you can't sell it (regardless of whether you've raised capital or not!).
The cheapest way to break into running your own business is through providing services. There are zero start-up costs and in some cases you don't even need money saved up. In my case I started freelancing whilst at university. I worked at a pizza place 3 nights a week to make ends meet.
Once I had enough work I dropped out of uni to focus on my business and was able to quit working at the pizza place. Working at a pizza place is great because not only do you get paid, but you also get free pizza.
That freelancing turned into a more substantial services business which in turn has resulted in the ability to boot-strap a couple of products.
This was not easy. This had highs and lows. I felt fantastic when I delivered an exciting project and felt lousy when I had no work. I hired a friend and had to let him go when a big project ended prematurely.
It's been hard and rewarding and I've learned a lot, but I wouldn't say this was any more of a roller coaster than any other thing in life about which you're passionate. I would say that there are many people in full-time employment who regularly experience the same levels of highs and lows simply because they care about what they do to the same degree that I do.
Oh, so you mean you have a lifestyle business?
In the words of the inimitable Eddie Murphy:
Shut the fuck up and get the fuck outta here with that bullshit
Eddie Murphy, Delirious 1983
A lifestyle business, whatever the "startup community" has co-opted it to mean, is when you run a record store because you love records like Rob Gordon in Hi-Fidelity. I would say that if you're running a lifestyle business, that implies that you have turned a hobby into a business and you care more about being able to do that hobby yourself than you do about making money or growing your business.
Running any other business is certainly not something you do for the lifestyle because it's hard work and quite often requires long hours and you don't generally get paid as much as you would if you were working in a comparable position at a large corporation (at first).
The original "internet entrepreneurs"
Before the dotcom bubble there were a whole bunch of people that ran their own businesses: they were called "designers". They became really good at building and maintaining client relationships. They got repeat business, they invoiced, they hired.
Then the web happened. These "designers" all of a sudden had to take what they were doing and apply it to a whole new medium. Early web design really reflected this. Designers made websites that looked like they should be printed and then hired HTML coders or used Dreamweaver to create terrible sins against markup in order to make those designs appear "pixel perfect" in all browsers!
It didn't matter, though, that technologically they were committing sins of the highest order because the most important skill they had honed still held true: they knew about invoicing, running a business and managing client relationships and, in many cases, they survived.
Another reason design agencies have continued to flourish is that people, or should I say "clients" think first about how something should look, not about how it should function. No one goes looking for a PHP programmer to build them a Joomla site then looks for a designer to make it look nice afterwards (even though that's actually a much better way to think about it!).
So what, I'm not a designer
Yeah well you know what? Designers aren't programmers - but who owns the client relationships? There's nothing to stop a programmer from offering design services but more often than not it's the designer who owns the client relationship and shops out work to programmers. I'm personally trying to revamp my programming offering to include design by offering design as part of our http://decalcms.com/ packages. You can try to! Or you can team up with a designer and start a services business. Or you can start a specialist services business and partner with many design agencies. Or you can start a services business that just writes bash scripts - whatever you want. The only thing that matters is whether or not you can sell it.
There's this term in the startup world, "runway". It refers to how much time you have before you run out of money, ie. how much time you have in which to build your product and make it profitable.
Well guess what: if you have a services business you can structure your billing so that you have 2 days out of every week to work on your product.
Of course, it will then take 2.5 times longer to build your product than it would have if you'd been focusing on it full time. Say you had initially planned to launch an MVP in 3 months. That means that, instead, you'll be launching in 7.5 months. BIG DEAL!
The other fantastic thing about building products this way is that if they don't work straight away, you have all the time in the world to make them work. We only have about 150 regular users of http://8centsms.com/ but that's no big deal. We're just taking our time trying to find out where the customers are and how to market it better.
You think you're going to miss the boat and lose your FIRST MOVER ADVANTAGE!?!? We launched a web SMS product in 2010. How much did we miss the boat by? But we still get new sign-ups each week. People are still out there looking for ways to send cheap SMS online - and we're not even the cheapest! The market is absolutely massive and we only need the tiniest little slice of it to make a reasonable return on our investment.
The answer to the question "should I be a startup entrepreneur" is definitely no. If you're asking that question then your motivations are all wrong and if you manage to get some money thrown at you you're probably going to make the type of terrible business decisions that result in you having to "lay off 60 people in one day", to quote Mark Suster.
Do business honestly and make sure your motivations are honest. Be honest with your employees if you ever have any, be honest with your clients and be honest with yourself. Don't get lured in by the bright lights of VC-Vegas - instead focus on building a profitable business where you get money because people buy what you have to sell.
Building software in the real world - the Working Software blog
We write about our experiences, ideas and interests in business, software and the business of software. We also sometimes write about our own products (in order to promote them).
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