Unemployed? Why Not Start a Software Company?

R.S.D. asks: "I see all these Ask Slashdot articles about unemployment these days. Why don't a few of you guys get together and start a software company? Out there in the world, there is still a lot of software that needs to be written, and people are still pumping lots of money into software (and biotech). In fact, the software sector is still described as the enduring leader in raising venture capital, though apparently in Silicon Valley more money is going out of the maturing software industry and into things that are still high-tech like biopharm and nano. Is anyone else trying this? If so, how's it going? If not, why not?" This is easier suggested, than implemented. For those who have gone this route, what suggestions would you give to those who may follow?

"Every time I see a group of 5-10 self-described 'great but unlucky' IT workers looking for a job, and how their previous company had to lay them off because their former employer had this 'stupid idea' it was to move all the jobs to Elbonia, I have to ask myself -- why don't these guys get together and start a software company. If you don't make these 'mistakes' of outsourcing development to Elbonia, couldn't you compete pretty well?

Best of all if you ever did need to grow, in this job market, you can get highly educated and experience software engineers even more inexpensively than China or India -- I've heard some internships are unpayed these days.:-)

Yes, I am taking my own advice, and trying this, even though I was not unemployed."

Comments

The challenge of financing

[glinden]

I'm not sure it's that easy.

The biggest problem for unemployed software engineers getting together and forming a company is financing. If you're unemployed, you probably don't have a lot of cash around to provide seed capital for your business. If you do scrape together enough seed capital or find an angel investor, you're usually stuck with not drawing a salary and having no health insurance for about a year as you try to ramp up your business. And you're doing all of this for a high risk venture where only 1 in 10 businesses actually succeed.

Nevertheless, I'm building a startup right now, Findory.com. But I wouldn't underestimate the obstacles here. It isn't something that can be done lightly.

Re:The challenge of financing

[sane?]

Sorry, your confusing me.

We've talking software here, the same stuff that many of you do for free with Linux. You have a computer, you have the skills, your marketing and selling might not be great, but at least one of you will be street smart and presentable enough to talk to customers.

So why do you NEED lots of finance?

Find a niche, find a need, create a demo of a solution and sell it. Deliver and find more of the same.

You can be faster, smarter and cheaper than the competition, and if it doesn't work, it need not cost you much at all.

Its one of the advantages of knowledge based industries - the barriers to entry are skill based, not fixed costs.

Re:The challenge of financing

[ComputerSlicer23]

Uhhh, creating Linux took years. Creating a viable piece of software that someone will pay for takes a lot of effort, and a lot of time.

Without some form of savings/income to draw upon, one can't develop software on their own (Free or not). You don't get a net connection for free. You don't get parts for free. You don't get to live rent free. If you do, you probably didn't need the job you so unluckly lost.

People work for a variety of reasons. Most of them are because they need income to barter for other goods and services.

Software that takes 6 months for one guy to slap together, isn't going to impress anybody who has an IT background. They'll see it's obviously only 6 man months of work... ;-)

Most people I know don't have 6 months worth of income available to them as cash they can easily spend. Getting 6 months of time together while working full time at a job is difficult at best. Especially if you work a time demanding IT job.

Kirby

Re:The challenge of financing

[Trillan]

As someone who's been working on this for the last eighteen months, let me tell you the sad truth: Being faster, better and cheaper... and even first to market... isn't nearly enough. What you'll need is the business deals that your competition already has set up. And they're most likely exclusive.

Why did I say competition if you're first to market? Well, your competition won't offer the product you're working on... but they will have similiar products, and they'll happily tell users and business partners that they're working on a product that'll stomp yours.

It costs a LOT. I'd estimate at least 70% of our costs go towards trying to get business deals, and that's the sort of thing you just can't do cheaply.

Re:The challenge of financing

[llefler]

I can't do it because its toooooo haaarddd....

He's talking about creating a job. Is your reputation so bad that you won't hire yourself? Anybody I know that is serious about programming owns a PC. All of them have compilers too. And if they didn't there are free compilers, either OS or previous versions of commercial compilers.

So you need three things; time (unemployed, you have plenty), a marketable idea (a little more difficult, but there are so many BAD programs out there than need replaced, not even counting processes where software doesn't even exist), and someone to sell it. The last being the hardest part.

I have a friend that is always telling me "I need to learn more about this or that so I can get a programming job". Let's see, he needed; better understanding of OOP, web services, XML, SQL.... So I gave him a project to write that addressed all of them. Since I have seen nothing in 4 months, I'm assuming he really doesn't want to program.

I turn down several consulting jobs a year because I like the security of a stable paycheck. I don't have time to do my job and consult. So my experience is that there is work out there. If you know anyone who owns a small business, they can probably tell you how some software that doesn't exist could benefit their company. And unless they have some really odd business, there are probably 1000 other small companies doing the same thing they are. Niche markets can be profitable for a small group of programmers.

Re:The challenge of financing

[sane?]

You're thinking big, think small.

You need a product that can justify costs of a few k per item. You are not in the Microsoft game, you are in the niche game. Value to a specific niche is what you are looking for. Value sufficient to justify the costs you will charge, and small enough that the big boys aren't interested.

So:

1. Have a number redirected to your mobile, and have a rotation within your little group.
2. A website is cheap to do well. Don't have an office for the first year. YOU are the sales force.
3. You are going to deliver it personally (unless its a web service). You're not in the shrinkwrap game yet.
4. Providing you keep it simple, you can use off-the-shelf software for this for quite a while. Sure, you won't find every tax loophole, but the accountant charges can be kept to a minimum.
5. Keep it simple. Try and start from the basis of your template contract. Use your brain, and a lawyer when you have to. The aim is to be a partner to the customer - if they try to tie you up in too complex contracts or terrible terms, walk away.
6. Work from home. Don't have fixed overhead costs until you have to. Plenty of companies can succeed to the extent they need to never having a 9 to 5 office. Some people swear blind that the office is a necessity. It you agree then get the cheapest, smallest, most dive like office you can.
7. Go to the customer, don't expect the customer to come to you. Sell on the solution you can provide, sell on your dedication. If they want the glitz then you will likely not get a look in until your turnover is $1m anyway - don't go after those customers.

I'm not saying I disagree with what you have said. There are lots of reasons why it can be too difficult, too expensive - but provided you keep you wits about you, they are possible to avoid.

Re:The challenge of financing

[oddman]

Exactly what is it about delivering pizza that makes it something that you need to "swallow your pride" in order to do it? It is lawful, gainful employment.

Is it glamorous? No. Is it challenging and stimulating? Yes, but necesarilly in a way you'd like. Is it high paying? Not really.

But none of these facts makes it shameful or somehow dehumanizing. In fact one might argue that the refusal to take a job in maunal labor or service (food delivery is both) is shameful. You should never consider yourself too good to take a job, if you are unemployed.

Re:The challenge of financing

[Tassach]

So you need three things; time ... a marketable idea, ... and someone to sell it

You forgot the essential fourth thing: money to live on. If you're living in your parent's basement, you might be able to survive on peanuts while you build a business. If you have a family to support, then your options are much more limited. If your spouse / SO can support the family while you're building the business, that's great. But when you're the primary breadwinner, you have to do something to bring money in *now* so that the mortgage gets paid and the kids have food on the table. "Sponging off your family" is a kind of financing -- they're paying your living expenses so you can build your business.

Market interfaces....

[BWJones]

Find a dedicated concept or conceptual area to exploit. How to do this? Simply ask folks what areas they are having problems with software needs.

I'll tell you that a number of folks are doing quite well at the interface between biotech and software. The amount of data that is being generated by biotech is truly mind boggling and we need software tools for analysis and visualization of that data. Software that is capable of analyzing multi-dimensional datasets is particularly in demand right now with gene chip analysis and the work we do in our lab on molecular phenotyping. For instance, we are adopting software used in the remote sensing community to analyze "multispectral" data sets in the retina and other tissues and the communities that this software came from (GIS, Remote sensing, Intelligence) are very interested in software that can help distill multispectral data real time to enable streamlined processing and analysis. Your link to DARPA is particularly informative for these potential projects, but don't forget about other resources as well like the National Institutes of Health.

uuuuh. did you think about this?

[heller]

There's not enough business in the software industry to support the existing industry, otherwise those who were in it before wouldn't be unemployed, and you propose another company?

Re:uuuuh. did you think about this?

[Rocketboy]

Perhaps the difficulty is that there's little need for more software vendors producing "me too" products. Is there really a profitable niche for selling a new spreadsheet, database, or word processor? E-mail or chat client? I doubt it. The challenge -- and the reward -- comes from inventing new products that don't exist yet, or which do exist but don't work very well. Remember too that the real money often doesn't come to the first group introducing something new and radical but rather to the more highly polished second and third. 'Course, that was before software patents...

Personal experience

[Anonymous Coward]

More than 90% of IT workers i know are employed. 100% of the good IT workers i know are employed.

Been there...

[AKAImBatman]

...done that. And I have to warn you, it's not easy. What you think makes a good product will in fact be very different from what your customers think is a good product. You can plan on at least a year of post-release development before your software meets the needs of your clients. And you'll have to be doing the development while taking the time to advertise the existing version, so you can at least make enough money to make ends meet.

My best advise is to start a small software company while still employed. Don't advertise too much, and listen to what your customers have to say. If you keep constant development going, you should have an excellent product prepped for the next time you're out of work (or to start off on your own).

unemployed? just get a job!

[egomaniac]

This is really no different than saying "Hey! You're unemployed, right? Why don't you just get a job? That would fix things right up!"

Where do you think the money comes from when you start a company? That's right, investors. Now, if you can't find a job, what the hell makes you think that you're going to be able to find investors?

"Hmmm. You've been looking for a job for the past year. Unsuccessfully. You have no experience running a company. You don't have a clear business plan. You have no leadership skills. Well, what have I got to lose? Here's ten million dollars. Have fun!"

It's not because of lack of great ideas

[Anml4ixoye]

The company I am working for I didn't join because of their great ideas. Though what we are building is very cool. It was the fact that the CEO and President are both Ernst and Young alumni, and two of our Board of Directors have significant experience in the industry we are building it for. On top of that, they have a rock solid business plan that I was very impressed with, and know what's important to spend money on (legal, dev workstations, software licenses) and what not to (not working off of a yacht yet).

Add to that what an earlier poster said about financing and you have the mix to keep most people from starting or suceeding at this. Show me software developers who know how to create a good financial plan, can prove a track record of delivering software, and know the industry they are building for, and I bet very few of them are unemployed.

Same reason I didn't

[dejaffa]

I'll give you the same answer a friend of mine gave when he and I were quitting a consulting company about the same time and someone asked why we didn't start our own.

I don't know anybody who's good at sales whom I trust.

Insulting

[DevCybiko]

Thats an insulting attitude. It's like saying "Hey, you're an assembly line worker, why don't you just go out and start building something". The fact is that there is more to making a successful software company than writing code. In fact, the code is the easiest part of the process. To be successful in business you have to identify a need and convince someone to give you money to address the need. Software Engineers (typically) are not well suited to salesmanship. IMHO you need at least 3 different personality types to start a software company. You need someone with creative energy and vision who can ariculate that vision in a way that motivates both clients and employees. You need a financially minded individual who can see the vision and convert it into dollars and cents - making sure that its a viable venture. and you need an imaginative technical lead who can turn the vision into a product that meets the needs of the client and keeps to the bottom line. It's not just a matter of writing code and raking in the bucks.

Why should you need financing?

[Coventry]

I did this over a year ago, with no financing. In fact, I was in debt upto my ears. First, some misconceptions need to be cleared up:
- don't get an office. They cost money. Work From Home. If you have multiple people, either work remotely and meeting irl a few times a week, or choose one central house/apartment and setup shop in a room there. Basements are fine, so are spare bedrooms.
- Use existing hardware.
- Get dirt cheap hosting and put up a good looking website. customers won't know you're only paying 5$ a month for the site.
- don't pay yourselves salaries - I've seen way to many people think 'I need X amount of cash to pay myself Y per week for six months until the business is making money'. Plan on paying yourself what you can, and using unemployment as a cushion until things take off.

Heres how it works: while on unemployment, come up with an idea for a type of software business, and then throw up a website (make sure it looks good), and start writing software. You have to keep looking for a real job, but as long as you aren't making money on the biz, you don't have any income to report, and still get unemployment. If you want to sell products, write them while still on unemployment. If you want to do consulting or custom work, be finding clients while on unemployment. If you are small enough, and have learned to be lean, then your first customers will pay enough that you drop off unemployment and go from there. If not, then divy up the money, pay for expenses, etc (The biz can pay you back for the web hosting, for example), then pay yourself. You Can make money while on unemployment, as long as it's not much - they will reduce how much you get from unemployment in a near 1:1 ratio.

If you do good, you may find yourself off unemployment and making better-than-unemployment wages within a month or two.

You may fail, miserably, but with a cost-of-entry of a few dollars a month and your time, it won't cost you much to fail. If you aren't on unemployment anymore - say if it ran out - then find a job somewhere else to tide you over while you try to get the business going. After all, a 8$/hr job at a bookstore is a lot more money than 0$/hr.

Also remember that starting a business is Not for everyone - many people want the security of a known salary, and don't like the idea of taking risks. Others don't want to work long hours, especialy on something so risky. Ask yourself if you are one of those people.

Me, I've been lucky, and perhaps that has skewed my perceptions. My friend and I were discussing starting our own company, and then a client fell into our lap... a client that by themselves paid our bills and allowed us to grow the business for 6 months. Of course, now we're looking for more clients, since things are slow, but thats the nature of owning your own biz - risk.

neurokode.com - yup, thats me and my partner, and yes, it needs work - we've been too busy to touch it much. Need contract development, or a code audit? Contact us. Want tools for DB development with python? Check out pdo.neurokode.com

Re:The challenge of spelling

[sane?]

Utter rubbish, put about by English teachers to inflate their perceived worth.

Don't beleive me? Take a look at the papers and articles of those with the ideas, those that have actually advanced knowledge. There is NO correlation between the ability to write well and the ability to think well.

We are all put together differently, with different skills and mindsets. You often find those that excel in one area will suffer in others.

I used to have teachers like you, and I'm damn glad that there were others to support me and recognise just how dumb such theories were.

In the end I got to the stage where I could string sentences together tolerably well, and make only a few mistakes.

Somehow it never stopped me making patentable advances and being a world leader in a niche technology field.

Funny that.