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Bootstrapping Start-ups
An anonymous reader writes "How many of us wanted to follow
our dream and start our own start-up? How many of us thought that it can't be done due to costs, the need of big bucks and convincing some snotty VC? Well it didn't stop these guys. The most current success story is
social networking software Huminity which
has been on /.
before. The recipe for their success was: open source, clustering $100/mo
servers, using the web to find native translators instead of using over priced
local ones and hiring GUI designers from popular skins download sites."
No favors
They've decided to go it alone, without venture capital. Meet some Israeli bootstrap start-ups.
Batya Feldman 1 Dec 03 16:54
In recent years, there have been quite a few entrepreneurs wandering around with good ideas (at least in their heads), but unable to raise capital. There are no more angels willing to invest hundreds of thousands of dollars. The number of venture capital funds making seed investments has sharply contracted, and those still willing to invest do so only after long and painstaking study, especially in cases of entrepreneurs without prior experience.
The chasm between the supply of technology entrepreneurs and the demand for them is evidence that the great high-tech and venture capital crisis did not suppress the spirit of the average Israeli entrepreneur. Last week, Walden Israel general partner Eyal Kaplan told "Globes" that following a lecture at the Israel Center for Management (MIL) start-up forum, he was handed 17 business plans by new companies seeking financing. The situation is similar at other funds that have announced plans to make seed investments.
But it turns out that there is another way, too: "bootstrap companies" in the venture capital jargon. These are entrepreneurs who simply go it alone rather than making the rounds from one venture capital fund to another. To those who wonder, the phrase originated in the tales of Baron Munchausen, who described how he saved himself from drowning by using his own bootstraps. Translated into the language of high-tech, the concept refers to a company that finances itself. No venture capital and no directors. Can you imagine?
It was possible to find such Israeli companies in the late 1980s and early 1990s, before the domestic venture capital industry began to flourish. Dov Moran's M-Systems Flash Disk Pioneers (Nasdaq: FLSH) and Yanki Margalit's Aladdin Knowledge Systems (Nasdaq: ALDN) were just two of the companies that established themselves almost without external financing. They developed an idea, then a product, and initial sales were miniscule. Company growth was directly related to success on the market.
"The funds were in the bunker"
Nir Ben-Halevy and Oren Rossen are the entrepreneurs and sole employees of start-up Huminity. Rossen was previously an analyst at Investec Israel (TASE:INSI) and Ben-Halevey was a member of the high-tech team at Deloitte and Touche - Brightman Almagor. Over a year ago, they decided to found a company based on the concept of a social networking product that combines chat and instant messaging, enabling users to share their personal networks.
After a brief round among the venture capital funds, they realized that they could not raise money and decided to go it alone. Ben-Halevy reminisces, "A year ago, it was simply impossible to raise money from the funds. They had gone down into the bunker. We believed that if we had a working product, their attitude might change. We believed that we could get it up and running on our own."
Ben-Halevy and Rossen left everything behind, moved to Turkey to lower costs and for the past year dedicated themselves to developing the product. Last month, they announced that they had raised $2 million, at a company value of $10 million, after money, from the same venture capital funds they had approached previously. The deal is now being closed. This time, they came to the funds with a working product and 400,000 registered users.
"We did everything very cheaply. We developed the product on an open source code system. It's true that Oracle's (Nasdaq:ORCL) system is more stable, but on the other hand we don't pay a $5,000 a month license fee," says Ben-Halevy. Huminity's open code-based product also allows the company to obtain the help of the operators community. "Why pay a lot when you can pay a little? We slashed costs. We didn't buy a big computer the size of a washing machine. We work with clusters. In the US, it's possible to rent a server for $100 a month, instead of buying a server for
This is a brand new account reposting a highly moderated comment from the previous slashdot story.
While the comment remains true, I hope the mods will send him right back down to -1. It looks like a troll charging up karma to me.
There are no trails. There are no trees out here.
- Sketch out a business plan that gives you some clue of how much money you really need. Hint, you do not need a million dollars.
- Pretend you're optimizing code and shrink the hell out of it. You don't need to pay for a hosting service above and beyond your cable modem in the basement. You don't need brand new machines when you can buy from ebay. You don't need an office, or business cards, or a travel budget. You don't need to hire person X if you can convince them to do it for free for version 1. Repeat ad nauseam.
- Go out and get the stupid money. Ask relatives. Rack up credit card debt. Tell them you're making an independent film or something. Move back in with your parents if you have to.
- Get customers. You may even find yourself a sugar daddy that likes your idea so much that they will pay up front, enabling you to do more sooner. This is how many startups get started, when a big company says "I am willing to be your only customer for awhile, even though I know you have no product, and I will pay you to build it, on the promise that I will get lots of profit once you really do have product."
It's been done plenty of times before. It's not inconceivable once you have a better handle on how much you need. Everybody thinks they need a million dollars to start, but in reality you can probably get started for a few hundred or a few thousand. And if your idea has any legs, then raising a few thousand bucks should not be out of the realm of possibility.www.HearMySoulSpeak.com
I do remember being hired for the Army to code a website, and no seeing a paycheck for 4 months. Not only did I have to get through that Army's red tape, I had to go through the University's who had subcontracted the job out to me's red-tape.
Now one advantage I have running a business on the side is the ability to exploit the uber-long lead time on projects. I had a coffee shop that took 4 months to figure out what they wanted, and a professional organization that from first meeting to deliverable was 9 months.
Someone who didn't have a paycheck to fall back on would have walked away from both. As it is, the checks are landing at just the right time to make for a very happy holiday.
"Learning is not compulsory... neither is survival."
--Dr.W.Edwards Deming
Many companies have you sign explicit NDA/Non-Compete agreements which will explicitly disallow you from doing any outside work.
Some will even claim that any intellectual property created as a result of you working outside of work hours will be owned by them.
Many people have been screwed by this in the past.
The license agreement states it is "LIMITED TIME FREE SOFTWARE" (or something like that). They have left the door open to charging at a later stage.
The rest of the license agreement is somewhat hard to read, due to a lack of headings and an abundance of lawyer-speak.
I'm not sure that their business model makes much sense though - I expect that at this stage of the game it will be too hard to grab a good share of the IM market, especially with only the one distinguishing feature, and no message encryption.
Most writers regard truth as their most valuable possession, and therefore are most economical in its use - Mark Twain
"Sweat equity" does not count as an expense and is not claimable... They need to see money actually moving from one account to another... BUT don't take my word for it :) Trust what I say with as much as you paid for it :)
Platform independent bug tracking software
Are you sure they paid someone to translate pages ? The french translation must have been made by some guy who had never talked french before :)
____
nico
Nico-Live
...was an entire inside wall of a compartment from an airplane, with an integrated toilet seat. It's held up as an example of wasteful government spending, but it's not as represented. I'd expect the hundred-dollar-hammer and similar stories probably have similar truths behind them.
Not saying governments don't waste our money, but this one just plain is misrepresented.
"VC is just a loan that you pay back with stock/IP"
Actually, equity financing is very different from loans. Basically, with loans if your business fails you still owe the money. With equity financing if your business fails you don't owe anything.
I'm not a big fan of debt. Equity financing, however, is an excellent way of doing things.
Engineering and the Ultimate
a good read for any startups is Joel Spolsky's journey in building his company from scratch. Put aside your predjudices about his software origins or the market he is aiming at, but make sure you read and digest some of the ideas.
It's a cheap way to read how he's organised his company from 1999 to the present.
peterrenshaw ~ Another Scrappy Startup