Joel Spolsky On How To Bootstrap a Business

Meredith writes "This is a great interview with Joel Spolsky of Fog Creek Software. Joel talks about the negatives of taking money from venture capitalists, and how the entrepreneurs that don't take money become 'super entrepreneurs,' learning how to make something significant out of nothing. This is a very popular interview among tech entrepreneurs and provides really valuable information for startups."

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Confused

[Anonymous Coward]

I am seriously confused. I learned the golden rule as a teenager: He who has the gold, makes the rules.

If your parents are paying for your food and shelter, you do what they say.
If you pay for your own food and shelter, you do whatever you want.

In business, if you get venture capital; the investors have equity in the business.
If your equity capital comes from your own pocket, you take all the risks and reap all the rewards.

In politics, public campaign financing lets all viable candidates compete on equal footing with no ulterior motives.
Without public campaign financing, candidates rely on "donations" (read: bribes), tell you they are interested in alternative energy, yet provide oil companies with record profits and state-sponsored corporate welfare.

In those famous words: "Show me the money!"
Why is it that so many people seem ignorant of this basic premise of how every "civilized" human society operates?

Re:Confused

[shenanigans]

I agree. And as a lot of people are now finding out, if you go to the bank to pay for your house, then it's not really your house at all.

Everyone is ignorant until taught otherwise. That is why basic financial sense and responsibility should be taught in school, along with a great deal of other things that are missing. Unfortunately, western schools (it's the same here in Europe) are still geared towards creating industry workers in countries that hardly have any industrial production left.

Re:Confused

[Brian Stretch]

Without public campaign financing, candidates rely on "donations" (read: bribes), tell you they are interested in alternative energy, yet provide oil companies with record profits and state-sponsored corporate welfare.

Or we could cut taxes, close down numerous government departments, replace the lobbyist-designed federal tax code with the Flat Tax, and otherwise reduce the amount of loot for "special interests" to fight over. It'd make life easier for small businesses who don't have K Street lobbyists on retainer to protect them from the federal government too.

Let 'em take all the campaign donations they want, just have full and immediate disclosure on the Internet.

Read something from someone more successful

[Animats]

I'd be more impressed if this were from someone who started up a company that grew. This guy has a little software company with one product, and he's had a little company with one product for, what, ten years now?

For comparison, read The Autodesk File. Autodesk was started with $60K from the founders, never accepted any venture capital, and had revenue of $1.8 billion last year.

Re:Read something from someone more successful

[jjohnson]

The reason you might want to imitate Spolsky is the nature of his success. He hasn't got a growth company, he's got a massively successful boutique ISV. They've got several products, none of which is particularly hot; but collectively, they sell more than enough, at a high enough price, for him to maintain an office in Manhattan that an architect redesigns every year. He also pays really high salaries and retains all the dot-com benefits so he can hire one or two rockstars (his term) a year, run an internship program, blog, and just generally be the IT celebrity that he wants to be. The company funds largely useless world tours for the launch of his software, which is just a business deductible junket for him. And I bet the code for all his products is *exactly* the way he likes it.

No one will ever use his name in the same sentence as Torvalds or Jobs or Gates. But he's got a pretty sweet lifestyle, and I bet most here would trade their left nut for it.

Re:Read something from someone more successful

[Tumbleweed]

But he's got a pretty sweet lifestyle, and I bet most here would trade their left nut for it.

Well...not my *left* one. That one's my favourite, you see. I know you're not supposed to have favourites, but I can't help it.

Interesting, but a wee bit old.

[crow5599]

Randomly, this interview took place over two years ago. The originating page: http://www.venturevoice.com/2005/11/vv_show_20_joel_spolsky_of_fog.html

Transcript?

[djcapelis]

I'm really disliking this trend of posting interviews in a video format. Just because you can doesn't mean you should... come on folks.

Anyways, anyone know if this thing has a text version or transcript of some sort with it? :-\

Re:You owe me!

[Tumbleweed]

You'd better laugh; I'm going to lose a job interview some day over this post when they ask me what tech. sites I frequent!

Only if you fill out 'Gazzonyx' on the job app.

And I don't owe you any Mountain Dew Amp or a keyboard. I have diplomatic immunity courtesy of my sub-5-digit Slashdot UID. :)

The company you want, vs the most profitable

[Anonymous Coward]

I debated for a good half a minute about whether to AC this. Surely it would be read by a lot more people if I posted under my normal /. account (which has at least a few fans, and my posts are generally modded up), but I think I would feel constrained in some ways about what I could say. Normally I am very open in my slashdot posts, but I'd like to talk about some of the transitions that our company is currently in, and I wouldn't be able to do that openly under my normal nick.

I'm the CEO of a tech startup (not in IT/IS, however), we've been a legal entity for about 2 years, and the entire project is 3-4 years old. I spent every penny I had to get started, and bootstrapped the rest of our seed money (around $1M) from family. There was a bunch more stuff here about how the project started, but I edited this and cut a lot of fluff out, because I dont think anyone needs to really read it to get the point. We build a few products, products that are technically superior to our competition, and at the same time cheaper.

When we had recently began to engineer the first product, I started to talk publicly on the Internet about what I was up to, and asked for feedback. People responded positively. Although some of the other companies out there are more hype and marketing related, and it was difficult to compete for attention when we had zero marketing budget, we were able to get good feedback from serious users. Some people I knew in the industry introduced me to executives at some of the more serious players that would eventually be corporate clients. Some of them dismissed us entirely, I think both because I don't look like a CEO, and because we aimed to do things that were very complicated, and to do them reasonably. One time in an introduction meeting, I actually had the CEO of one of the potential clients/partners spend about 85% of the meeting talking directly to our lead engineer (who is about twice my age) instead of to me, because I guess he didn't listen well when we were introduced, and had assumed I was the engineer and "the gray-haired guy" was actually the CEO, haha.

The greatest reward of bootstrapping, for me, has been the ability to run the company I want to. For me, that means making tools for other techies, and making them accessable to techies. I'm not really a CEO, I'm a techie. I've probably made some less than optimal decisions as a CEO-- We could have priced our product at double what the competition sold their crippled ones for, and it would have made more net profit, but I didn't want to cater to just the most affluent segment. I didn't want to cripple my products just to slowly dole out a "new" version of the same old tech each year with less embedded crippling. I wanted to make a really robust, useful product, get it in the hands of guys like me, and use the profits to make it better and better.

So as you point out, Spolsky enjoys the same type of company I do-- I could make more money by changing our business model, but I wouldn't be as happy. I wanted to run an office where people didn't have to conform to some arbitrary dress code that had no bearing on their job performance, or leave their pets stuck at home alone all day. Life should be about enjoying yourself, and I feel very fortunate to be in an industry where I do enjoy myself, and no longer be in a position where I have an idiot CEO above me, who doesn't really HEAR what I'm saying, and with whom I have to wrestle to do my job properly. I try to listen to our engineers, designers, programmers, and *NOT* be the archetype of the idiot CEO that we've all had to deal with before. Our competitors.. most of the people in the industry know those CEOs by name. Most people in this industry probably couldn't tell you my name (although most of them know our products!). The downside (if you want to call it that) of being a niceguy techie CEO is that most people don't take you seriously as a CEO-- I don't inspire Jobs/Gates/Trump style excitement with the various fanboys of m

Re:The company you want, vs the most profitable

[eison]

Summary of your post:
Companies with a better image have more people using their software. You spend no money on marketing and enjoy a collegiate atmosphere. Your next step is to get a better image. You're going to get VC and scrap the collegiate atmosphere to do it.

So:
Why do you need the VC to have a marketing budget and a better image? Why not just spend some money on marketing and have somebody (yourself in a suit, an imported gray hair, whatever why should it matter who your customers think is in charge if it makes them happy?) present a polished look to the world so that you can get more customers and write more software?

Nothing particularly magical about the VC money. They might have connections, and can probably recommend a respectable looking gray haired new CEO, but you can find those things without them too.

Re:tradeoff

[coolGuyZak]

The main concern with venture capital isn't losing capital, it's losing control. VCs invest large sums of money into a company, they appreciate large returns on that money. The agreements an entrepreneur enters are usually rather draconian. The preferred stock VC's request include limitations such as veto-power on board decisions, "first dibs" on liquidation funds, multiple seats on the board, etc. VC's also hold a "predatory" mindset; often, they wholly replace your executive staff within the first year of acquisition. Their influence can impose "corporate" values on your company, to the detriment of the environment an entrepreneur previously established. For some businesses, VC is the only way to finance a fledgeling business.

If you're business doesn't need this kind of capital, there are many other options available to you. Loans, angel investors, hedge funds (almost VC for the east coast), family investment, and "winging it". Often, these methods require about the same amount of as attracting VC. The upside: more control. The downside: less capital.