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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."
Argh my eyes! They're still blinking!
I have several ideas that could make great money but they ultimately require money to make money. Does anyone have a good suggestion for raising capital without forfeiting the rights to one's intellectual property?
Life is the leading cause of death in America.
... their bandwidth costs have forced them to close down.
and i am the only employee/CEO of the company....browse pr0n all day. haven't figured out how to get somebody to pay me for it though
There are no more angels willing to invest hundreds of thousands of dollars.
Sure, if by angels you mean idiots.
really now, how many people have made a web based version of this already where we don't have to bother with installing an application. and as for the design of the site and the product, i'm sure there are plenty of skilled designers out there who would give them a helping hand, because they sure need it.
What is their business model? Selling people t-shirts while they use the software for free?
I'm one guy. I also sell t-shirts and give away software. I'm a startup too!
Contract out to a conservative Christian thinktank and sell them statistical reports on the amount of depravity on the net.
the preceding comment is my own and in no way reflects the opinion of the Joint Chiefs of Staff
Hey...saving bucks on the servers / connection surely "pays off" now ;P
If you're a start up, like me, do not, repeat, *do not* make the government your first contract. They will bleed you dry with all the waiting due to red tape and politics.
I now understand the $700 toilet seat:
* $5.95 for materials
* $694.05 for overhead
Completely justified IMHO
tallgreen.com Recent startup, still relativly small, Provide Open Source CMS hosting using WebGUI (cms), Communigate (email) AWStats (stats), Resin and other open source software. No VC, No debt, No CTO, Low overhead and primarily service based. It doesn't take much to start a small company and grow. Know your market, find ways to reduce costs, provide good products/services.
TallGreen CMS hosting
Sometime you don't need money to make money, just the will to rummage in the trash.
There's always the story of Wallflower, a company that makes digital picture frames. They got their start by buying ancient laptops (considered scrap) and re-shaping them.
Sometimes, you can start a business with nothing but a little cleverness, and an order from the scrapyard.
On the negative side... In a country such a Canada where you can claim R&D tax credits, you can only claim these credits on real expenses - so if you pay yourself (next to) nothing, you won't be able to claim any of that as a tax credit...
Platform independent bug tracking software
...I think the "local translator" for germany was called babelfish ;-) (or at least a close relative of it ;-)).
Ok ok, it's not _that_ bad, but I guess it's been translated by either a non-native or a native with quite small technical understanding (translation of specific IT terms sound a bit funny...).
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.
The recipe for their success was ... hiring GUI designers from popular skins download sites.
Too bad they didn't hire any actual user interface designers [or at least a graphic designer for their website or even someone who could figure out that it doesn't draw scrollbars in Mozilla]. The 'skin' scene is nice if all you want is eye candy and shiny objects but little else. And looking at their software it doesn't even look like they listened to those desingers much.
User interface design for software is not a paintjob or some quick usability fixes while you're in beta, it's a part of product development.
Your main goal is to immediately quit your current job. If your goal really is to start something new, then in many cases (but not all)your dedication and discipline will weigh more heavily than your financing.
There's always the hours after your 9-to-5 (assuming it's a 9-to-5), and they are yours to spend as you wish. If you want to risk your time (and maybe a few of your buddies' time) on a venture that may or may not generate any income, the risk/benefit is pretty well in your favor.
Yes, it is hard to be disciplined enough to find the time when you go home, or to treat it like a real project rather than a hobby, but these are matters of self control, and usually within a person's own determination.
The moment you ask someone else to fund your venture, you are turning over some part of what determines success or failure to someone else.
Need a simple, easy to use data tier generator? http://www.gryphinsoftware.com/
Go more than 500 miles away, make friends with local druggies, move up the chain, gain their trust. Do little deals for a while until you have the capital to pull a big one, rip off the supplier, move back home (or better yet, elsewhere) and sell off your stolen drugs while holding your ill-gained cash. Most mid-level pot/coke dealers aren't nearly as tough as they seem, they aren't going to go more than 500 miles out of their way to recoup under $5,000.
"Sometimes, I think Trent just needs a cup of hot chocolate and a blankie." -Tori Amos on Nine Inch Nails
Remember, Hewett Packard and Apple were started out of a borrowed garage.
I am currently running a web developement firm and an ISP from my basement. It's not enough to quit my day job, but it does help line the pockets around the holidays. My market is small non-profits and family run businesses who are sick of dealing with large ISP's, and getting raped by web designers. My product is reliable service for a good price, and the ability to tweak the system to make it do what THEY want it to do.
"Learning is not compulsory... neither is survival."
--Dr.W.Edwards Deming
.. is control.
If you do it the VC way, they will force some people on your board, heck they will force you to _have_ a board. They call it "adult supervision". There is alot of flexibilty you are going to have to give up.
I went through all circles of VC hell and finally decided to go slowly and by myself.
While the above aphorism may be true. Think if you apply the same reasoning in an evolutionary framework. If you don't take a chance, you don't survive.
The question is whether you can make that $1 do more for you than give you a 1 in 65,000,000 chance at retiring early.
Teela Brown has to come from somewhere.
- 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
Here's a karma burn. MOD PARENT DOWN!
The site is large and not going to buckle under the load of Slashdot's linking it. Ads are few and non-obtrusive. No registration is required to view. Let alone the fact that copying the whole of the text is illegal. But, hey, since when did the typical /.er care about copyright infringement.
Oh, and the text is mutilated. Our friendly AC replaced "power" with "penis size" in the final sentence. Then again, maybe that's why it's being modded up as insightful?
You like splinters in your crotch? -Jon Caldara
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.
My partner and I have an online service that we have launched with basically no money. We are entering our third month, and we are breaking even already. Actually made a peep of a profit last month.
Since we have no money to play with, we find advertising to be the most difficult aspect of starting a business. We do the cheapest things imaginable, and quite often simply ask for established sites to support us, flat out. Google adwords helps also, especially since our keywords are cheap. For payment processing, we use paypal because we cannot afford the setup and gateway fees of a proper service.
The site design and hosting was actually the cheapest part, as he is a graphic designer and I sling code and already have adequate hosting for our service. Hehe, I would post a link but no way can I survive a slashdotting, even a mild one. We have just enough to get by on.
Anyway, we are not making a lot of money, but we started with almost nothing and are ( however pathetic ) profitable and growing rapidly. You just have to be creative, have a service people want, and be willing to beg for eyeballs sometimes. Good luck to anyone who is trying it. With a bit more money than we have to work with, you might do quite well. You will certainly get there faster than we are.
Where have we heard that before. Are we now advocating shipping jobs offshore as long as it saves a lot of money and does not affect quality? Or is it that these jobs were not IT positions, so no one cares.
Anyway, the whole post sounds like an advertisement. Hope /. got comensated.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
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
"Learning is not compulsory... neither is survival."
--Dr.W.Edwards Deming
...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.
Part of their "recipe of success":
using the web to find native translators instead of using over priced local ones
Did I miss something? Aren't we opposed to outsourcing jobs overseas? Don't our big tech companies consider us "overpriced local programmers?" So, when it's a little guy, outsourcing to cheap, overseas labour is "innovative," but when IBM/Sun/Microsoft/Dell does it, it's Anti-American, and worthy of a global-scale boycott?
Like woodworking? Build your own picture frames.
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.
Those with short attention spans are doomed to repeat recent history.
Unless your startup needs a factory, gobs of employees, or other extensive capital, you don't need megabucks, only kilobucks. No need for snotty VCs, selling off rights to future IP, etc. It's still hard, but 95% of existing businesses have done it.
You just have to start small. One of the worst legacies the dot.boom left us was the general perception that businesses have to be large to be successful. Nothing could be further from the truth. I don't have the current statistics, but last I heard them a few years ago, 80% of businesses in the US had 20 or fewer employees. In other words, small business is king.
I've worked closely with many individuals who have started businesses from scratch. It's not cheap, but it doesn't require millions from venture capitalists. Your credit cards, retirement savings, relatives and a trip to the local bank are often all that's needed to start out small. And small is all that you need. You'll be working your butt off eighteen hours a day, but you can do it.
If this is software, you've got a headstart over most other businesses, since you don't need to carry inventory, rent warehouses, or run factories. All you need are salesmen and developers. The developers may be expensive, but your salesmen will be cheap, since they'll be bringing in their own paychecks. As a bonus, your product is infinitely reproducible at no cost. Heck, you can even contract out development to bring in cash flow while your main product is getting ready.
Your hardware isn't going to be that expensive, if you stop thinking like a gamer. You can get away with old i386 or Sparc5 boxes for your servers. If the software is ultimately an end-user product, you'll need a variety of current hardware to test on, but otherwise it's a luxury you can't afford.
Don't blame me, I didn't vote for either of them!
I started a software company as an experiment a couple of years ago. After a lot of long nights it is slowly getting to the point where I might be able to make a living at it. I have one full-time employee now and I manage to take a couple K out each month. Through the whole process I have worked another job to pay the bills. My take on your question is that nothing is going to get you off the ground but hard work. Nobody is going to throw money at you. Build a simple product that works well and performs better than what is out there. People will buy it, distributors will find you. But you have to work hard and be dilligent about quality or you shouldn't even start.
so you are wasting time then?
paperwork for a LLC... why? there is no law that says you have to incorperate. be a business owner.
Business plan? good idea... VC review? why? who in their right mind would want any VC scumbags near their dream? VC's are not interested in building a long-term anything.... they want a return ASAP.
go slow, unless you are building a product that requires that you sell X units a day to survive, or X number of subscriptions... (Then your business model is horribly flawed.)
I've been manufacturing a temperature board for a popular home automation controller for 2 years now. I make a 60% profit on each unit sold and I am about to expand into another product shortly... completely financed by the sales of the first unit.
in about 10 years I'll probably need to start working at a real office but until then my expenses are extremely low and I actually made a profit last year.
Do not look at laser with remaining good eye.
and thats two times too many. crappy website. crappy product. htf does this stuff make front page ??
One of the big points made in the book is that the incredible overhead of venture capitalists can, and often does, sink a startup company.
The book covers Arnold Kling's attempt to start homefair.com (an online real estate service) way before anybody had a clue about what the Internet could do for real estate. It's funny/frustrating to read how many clueless bankers and real estate agents blew him off.
Ben in DC
"It's the mark of an educated mind to be moved by statistics" Oscar Wilde
Heh. "Snotty VC" in the blurb reminded me of 1999, when I was employee #4 at a software startup. The company makes software for a specific type of business. Through tests we had done, we could prove that we were capable of increasing profits for companies in the target market by 25%-100%. /. terms, many of these companies did indeed leave out step 4 before claiming that step 5 would be "Profit!"
Unfortunately, as I said, it was 1999. Smart VCs like John Doerr had seen good business opportunities in companies like Yahoo!, Amazon, AOL, and others, and made huge wads of $$$ for their firms through shrewd investments. The clueless wannabe VCs apparently missed the point that-- internet or not-- the success of investors like Doerr was based on careful evaluation of business plans and business models. The Doerr wannabes apparently said to themselves "John Doerr made a lot investing in internet companies, so we have to do the same." I figure that's how multiple internet pet shops and ridiculous internet businesses got funded, with many even going to IPO without having anything resembling profit in the foreseeable future or even a decent roadmap to achieving profitability. In
Getting back to how this was relevant to my personal experience, the founders of the company (employees #1 and #2) would make their presentation to some VC, again, showing that the company's software could produce billions of dollars of value for companies in the target market, and the response was almost always the same: "OK, but what's your internet story?"
Most of them were really snotty, saying that "these days," anything that isn't internet-based doesn't have a chance, or something equally short-sighted and clueless. But they said it with such authority and such snottiness that it would make even the strong of stomach want to vomit.
At the time, I said "Let's just change the name of the company to 'e-(Real Name of Company)-dot-com' and we'll be swimming in money!
After that, I became a big fan of F**kedCompany, which now seems to include non-dot-coms a lot more than it used to. Back in the day, it was more focused on reporting disasters in dot-coms that probably never should have been funded. Every time I saw another online business with no clear sustainable revenue stream (the $$$ from idiot VCs desperate to pour money into anything dot-com doesn't count-- it has been proven not to have been sustainable) go down the toilet, with an amusing report on F**kedCompany, I would snicker and say to myself "Yeah, I've got your internet story RIGHT HERE!"
--Mark
"It is nice to know that the computer understands the problem. But I would like to understand it too." --Eugene Wigner
Patents are the best way to protect your IP while trying to sell ideas. Find a patentable idea, outlay to patent it, then you have a solid basis to try and and sell it/licence it.
I recently took a new products development class as part of my MS Management of Technology degree (shameless plug: UNH MS MOT) and what the above poster described is mostly true. Other sources of funding include:
Government grants (Matt-Lesko-style)
Government small business loans (these are largely the reason for Subway's growth since franchisee's typically take one out to open a Subway.)
Your Rich Uncle
An angel investor. An angel investor typically will invest in early-stage companies to help them get going. They are tough to find, but usually have lots of experience and business acumen to help you out. Like other forms of VC, these want a return on their investment, but will want you to be heavily involved in the company, which means you will own your IP.
Paizurishitetai desu ka?
It seems like a lot of developers have great ideas for programs that will make "lots" of money if they only had about 10 million to develop them.
My bet with my own shareware company is to start small and hang in there. Right now it is just a job for when I come home, but eventually, hopefully, it will build up to something.
I know a few guys that run brick and mortar and web based businesses, and there whole secret is persistence. Just, start small, then, hang in there. Look how long Linux hung in at the hobbiest level before it really took off? How was 1994, 1995, etc, for Linux? Really? Those were some lean years.
Start small, keep building, then, hang in there. Either you will make it or you won't.
This is my sig.
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
Yes, you may have to run up credit cards and eat bread & water for months, but here's what's really important: Customers
Every single work day, dedicate 9:30 - 11:30 AM to nothing but cold calls [ok, I hear your moaning...] Or have your S.O. do it -- if s/he has a less threatening voice.
Google "cold calling" and learn the best techniques, on-line -- they do work. Do calls every day! Fill out a spreadsheet with who you're going to call the next day and, just like successful aerobics, get up in the morning and do it without thinking about it. Use a similar spreadsheet to track who you've called and call again the next month. And the month after that.
Eventually, you'll turn those calls into appointments, you'll turn the appointments into sales, and you'll turn the sales into (life-long?) clients. Eventually you'll be paying all your bills, on time. Eventually you'll be paying down your debt and even saving a little for retirement. Eventually, you'll be eating out in style, again. Eventually, you will not need to do any cold calling!
We do about 20 calls a day, and a day doesn't go by that I don't get at least one appointment. Sometimes it's someone who's rather friendly or curious. So I go the next day and introduce myself in person and ask a slew of questions about their business. I don't tell them anything about mine unless they ask -- then I keep it to just one sentence worth of info. and get back to them.
After about 4-6 "appointments", I make a sale. If I do a great job the first time, the first sale can lead to many, many more. A client tends to return to the one person s/he knows. They rarely let another geek into their sphere, unless there's a good reason.
I also think it's good to "spread the wealth". So for other geeks I trust with my clients, I throw work their way as much as possible. Clients like to know there's a "hit-by-truck" backup for your services.
Remember how hard your first real job was in IT? Took you a while to get to real "success", right? This is no difference, except you're having to sell to several "bosses" instead of just one [cheap, lying, no-good, rotten, four-flushing, low-life, snake-licking, dirt-eating, inbred, overstuffed, ignorant, blood-sucking, dog-kissing, brainless, dickless, hopeless, heartless, fat-assed, bug-eyed, stiff-legged, spineless, worm-headed sack of monkey shit] Holy shit! Where's the Tylenol...