Ask Slashdot: How Should You Launch A Software Startup? (theguardian.com)

Slashdot reader ben-hnb is a developer who loves the idea of running a startup, or being one of the ones who got in early. But how exactly does he get there? I've got no "business" experience. Everyone seems to want to get on the startup incubator train -- the latest U.K. model I've seen, Launchpad, would even train (MA!) and support me financially for a year while developing the initial product. This just one in a long list of different models, from the famous Y-Combinator three-month model to the 500 Startups four-month seed program and simple co-working spaces with a bit of help, like Launch 22.

If you wanted to get a startup going, where would you go to first and why? Or would you just strike out in your bedroom/garage?
Leave your best answers in the comments. How would you launch a software startup?

Comments

Write software after work

[DogDude]

Keep a job. Write software after/before work.

Re:Write software after work

[fyngyrz]

This. The moment you involve investors / angels, you lose control. And if it's software you're actually interested in, rather than shifting money around, you don't want to lose control.

OTOH, if it is money you're interested in, then the mechanism is get a lot of money rolling, shuffle some off in your direction, and hand over control ASAP.

Re:Write software after work

[LifesABeach]

99% of all businesses fail in the first 24 months for one reason; no one knows your product exists. I would suggest some quiet time considering how to communicate the existence of your product to others.

Re: Write software after work

[Anonymous Coward]

I ran a software start up for ten years. Grew from me to over fifty. I now contract for silly money and love it, while i have a nice business generating me passive income

Main lessons:
Expect no life. You work 14 hour days, 365 days a year
Expect to fail two or three times before you make it
Expect no money. You will earn some years, give other years and on the whole make very little
You will worry about cashflow every week
No one will ever pay their bills without chasing. Expect to spend 20% of your time chasing debtors
Follow lean startup. Really follow it. Don't listen to people that say it's just a fad. You haven't got the experience to know when to break the rules and those rules aren't bad.

You will need to be able to sell. Are you any good at selling? If not quite your job and get a job as a used car salesman (or other sales job) for six months while someone else teaches you how to sell. This is far cheaper in money and time than the mistakes you will make if you don't know how to sell

You will need to learn the directors responsibilities for a company. They are real, onerous and you can go to jail if you mess up (you probably won't mind you). Plan on spending some time doing courses on this

Once you go over five people you need a ton of paperwork. Fifty different policies on everything. You'll need to pay a load of money to advisors and lawyers. You will loose key people at this stage

Do you know how to manage people? Do you know is how to take a team of five to a team of fifty without destroying the company doing it? Do you know how to delegate without dumping and destroying people?

Do you like spending your time in resource planning and sales meeting?

Do you like social networks and going to networking meetings twice a week, keeping track of people's names and maintaining email conversations with fifty people every week just to 'keep the network'

My advice: if you can answer yes to most of the above it's good. You will fail two or three times (I've failed three times and am doing well on number four) each failure will make you stronger.

My real advice (which my children are following and doing well l would be to get enough passive income to support you first. Find a mentor. Spend two or three years learning how to get passive income, another two or three years getting to a couple of thousand dollars a month passive and the experience of that will teach you a lot about running a business. You can then quite your job and work on the business without fear of going bankrupt every week

Re:Write software after work

[dgatwood]

99% of all businesses fail in the first 24 months

[citation needed]

It isn't quite that grim, but hyperbole aside, 80% of startups fail within the first year, and 95% within the first five years.

The first thing you have to do is disabuse yourself of the notion that starting your own company means you're going to get rich or that you'll pay other people so you can have less work. Expect to have to do far more work than you ever imagined, and expect the business to fail. Make sure you have enough money set aside that when it fails, you'll have time to find another job before you go broke.

And always keep in the back of your mind that every single one of your employees should be making those same calculations, but may not be. The once who don't depend on you to keep them out of the homeless shelters. Be honest with yourself about how the company is doing financially. Don't fun your business into the ground chasing after the next big thing. Come up with a solid plan to deliver a product that's realistically achievable, and then deliver it. Then come up with a solid plan to deliver something else. Try to reach profitability early, and if you conclude that your plan to do so isn't going to work, fail early and move on to something else that's achievable before you run out of funding.

Try to hire people straight out of college who don't have a lot of outside financial obligations, so that if the company goes belly-up, nobody loses their house. That or hire people who are older and wealthy enough that they choose to work for you because they can afford to take the risk. Try to avoid people in between—not through discriminatory hiring practices, but through open, honest communication. Tell them up front exactly what they're getting into, and let them decide if it is right for them. Most of the time, the people who really can't afford to take the risk won't, assuming you warn them ahead of time. But know that at least a few of your employees will ignore the warning. Manage your finances with them in mind.

Re:Write software after work

[quax]

Yep. Bootstrapping that's what I've been doing. We've been around for tow years but are just now at a point were we can launch our first product in the cloud, and low and behold now some dude from LA wants to buy a third of our company.

We still have some runway left and I can always do some consulting on the side to keep me afloat, so we are in no hurry to take on seed capital.

Re: Write software after work

[vanye]

Good advice.

It's very unlikely a person will have the skills to both do low level engineering and create a sales and marketing strategy.

So find someone who compliments your skills and can do the things you can't.

I've co-founded two startups with my business partner - she is great at the outbound side and I work the technology side. Finding that key business partner is just as hard as a romantic partner - you need to "date" just as much before settling down....

Re: Write software after work

[guises]

I love your last line there: "The first thing you should do is become independently wealthy."

I can't deny that it's good advice.

ok

[phantomfive]

It sounds like you don't have any real ideas, so don't start your own business.

If you want to join a startup, there are certain recruiting firms that specialize in startups. Every recruiter who contacts you, tell them you are looking to join an early stage startup. It also helps to go to meetups and such.

Finally, if you don't have "full stack" ability, then it's going to be a lot harder for you. Maybe build up your skills a bit.

Building Your Startup series

[reifman]

Please check out my Building Your Startup series at Envato Tuts+. In it, I walk people through every step of building Meeting Planner. There are upcoming episodes on crowdfunding vs angel or VC investing. A lot if is development-oriented but there are wide-ranging anecdotes throughout.

You have to want to do it for the right reason

[El Cubano]

... developer who loves the idea of running a startup, or being one of the ones who got in early. But how exactly does he get there?

Bzzzt! Wrong answer.

Ask yourself this question: could I start a project on SourceForge (or more like GitHub nowadays) and keep it going for 2, 5, 10 years?

The early days are all fun. The company is growing, you are having Nerf gun battles in the conference room, etc. However, after a couple of years the shine starts wear off and it starts to feel more like a job.

Not only that, but if your goal is a "startup" in the Silicon Valley sense of the term (grows quickly and then gets acquired or goes public), you will have deal with most of the following:

• spending lots of time shopping your idea to investors
• fending off competitors
• trying to make payroll
• praying to whomever you pray to that Google, MS, and/or Facebook don't decide to blow you away like the speck you are
• praying that you will make your revenue targets so that your investors don't step in and replace you with someone who will get them the return they are expecting
• the list continues

You will notice that none of those things involve writing software. Don't get me wrong. The core technology that underpins your idea is absolutely critical. However, ideas are a dime a dozen. It is much more difficult to get a working implementation that people are willing to consider investing in is much more difficult. More difficult still is the other 90% of the startup gig that has to happen if you want to be a success.

So, back to my original question. Could you see yourself managing an open source project for the long haul? Open source projects only have to deal with a tiny fraction of the non-programming things that you would have to deal with in a startup environment.

Incidentally my perspective is based on my experience several years ago almost deciding to make a run at it myself. I took some classes at the local Small Business Development Center, talked to some local startup folks, and then promptly decided I don't have what it takes. I stuck with my consulting gig that I've been doing for some years. That suits me much better; someone else gets to deal with all that nonsense and then all I have to do is find companies with problems that match my skill set, which is much easier for me that trying to run a startup.

Re:You have to want to do it for the right reason

[R3d M3rcury]

I gotta admit, that caught my eye as well.

"I love the idea of running a start-up." Not, "I have a great idea. How would I start a business around it?"

There are lots of ideas that I love, too. I love the idea of being an astronaut. But considering I have issues with motion sickness and a fear of heights, I don't think I'd be a good one. But I love the idea.

I love the idea of being in an early-stage start-up, mostly because I might get rich. So I was part of an early stage start-up and, frankly, slaved for more years than I should have with the occasional missed paycheck. Ended up going through a reasonable amount of my savings before I finally decided that enough was enough.

Why are you interested in running or being part of an early stage start-up? If it's because you might get rich, you might want to think of some other options which will offer you a better chance of becoming rich.

JoelOnSoftware

[johnsmithperson123]

Joel Spolsky blogged his way through his startup experience, and since he has an office in NYC and founded Stack Exchange (along with surviving a Bill Gates questionnaire and serving in the IDF) I'd imagine he's a decent source of enlightenment upon the topic. Everything from venture capital to office space, business models, etc.- he blogged about it.

What is the goal of the startup

[Elfich47]

The intent of a startup is to develop a product that people will buy from you. It should be a product that isn't already on the market. If you are thinking another facebook/google/youtube/dropbox/trailers/angrybirds/office productivity clone of existing products: Stop, go back to your desk at work and keep churning out code for someone else.

You need a unique/newish idea:
If you have an idea you think is actually new and useful. Do some googling on the idea to see if anybody has considered it (or similar overlapping ideas) and the response to it. Do some basic patent research to see if anyone has staked ground on your idea. Do some informal research to see if people are interested in (and would pay money for) your idea. If you feel you have to to mask the purpose of the research, go for it (it just takes more time). Surveys can be written to show interest in one item while simultaneously drawing out information on a not so obvious second. Now you have an idea that should be relatively unique, patent free and people want (even if they don't know it or can't articulate it). If you can't answer these questions, stop now.

Get a lawyer
You will need to incorporate at some point and a business lawyer will be able to point your in the right direction on the pros and cons of different company types. Also plan with the lawyer on your future end goal (expand or buyout) so your company can be structured properly for future action. You need manpower, budget and a business plan:
How many man hours will it take to have a demo model (no matter how crude)? How many man hours will it take to bring it to market? What is your time frame to bring it to market? Do you need to quit your current job to work on it? Do you need to hire people in order to meet your deadline? How much runway do you estimate you need in order to get off the ground with a saleable product? This is the basis of your development and launch budget. Your business plan is your estimate on keeping the company operating: what are your liabilities, assets, income and burn rate of reverses?

Where is your budget coming from?
If its just yourself you have to go back to a day job when you bank account is empty. If you are employing other people you need to continuously be out there pitching for seed money (which takes away from dev time). So having a working demo that you can pitch is needed. Have your pitch smooth and bullet proof and be ready to field all sorts of outlandish questions, be told "we'll think about it" and then ignored, and to be told NO many many times.

What is your end goal?
Do you want to develop into a larger company or be bought out for a pay day? Do some research on your Phase II goal. It doesn't need to be now, but you don't want to be surprised when you turn around and realize that you are suddenly employing 35 people and you have a large company knocking on your door with an offer and you don't know what to do with it.

My Path - Super Slow Contracting

[brian.stinar]

I own Noventum Custom Software. Noventum is a small company (me + 1 full time W2, and 3 part time 1099s) that offers software development services to others. This isn't exactly a high growth startup, but we do have two intellectual property projects we're working on (that customers paid for, which we own the IP.)

I have two rules:
        1.) Know how we're going to get paid before working on a software project, and where the money came from (past tense - already exists and can be talked about using concrete terms.)
        2.) Don't work with people with zero business experience, even if they meet the first criteria.

Our model is based on very low risk, slow growth, tried and true business practices. All of our customers are successful companies that have come to rely on custom software for their businesses to function, and it's immediately clear how they plan on paying us. Mine is not the kind of business that other people invest in, or that brings a brand new, innovative, product to market quickly. I am building a team, and involved in activities that I believe will help me with the skills needed to actually have a product.

So, for you, what I would recommend is to start contracting, and gain business experience. If you're able to offer your services to others at hourly, or in fixed-rate, contracts you will start to develop all of the ancillary skills that are related to selling software, which are only tangentially related to the actual coding. There are many such skills, with the primary one being sales. Unless your organization has some ability to sell, it won't really matter how awesome your product is if no one knows about it, no one is buying it, and you have to work another job to pay your bills. Also correctly paying taxes, and managing the books for a business is another skill that I wish I was better at. Aesthetics are another skillset that I lack - it's important to make things look nice. All of these skills take time to develop, or even to be able to evaluate in others. If you have a mountain of cash, you'll burn through it learning what it means to manage salespeople, designers, and accountants, unless you have some skill in these areas.

The three successful product companies I've worked with/for all began contracting. This allowed them to get paid to learn their customers' needs, since the customers would then sign a contract with them to have these needs met. This is the approach I recommend.

I am also from New Mexico. Culturally, we don't look highly upon the 18 companies that VCs fund that go broke in order for there to be one home run. This model is not attractive to me, even if I understand the basic mathematics behind it, and consider it an effective method of wealth generation. Depending on your values, geographic location, tolerance for risk, and perception of the passage of time, there may be a better path than contracting for you.

I Know!!! I Know!!!

[FudRucker]

with a trebuchet

Two entirely different questions

[Kjella]

If you want to join a startup, go to these incubators and ask them to give you their elevator pitch. If the basic concept sounds okay, ask if they need more staff, what they'd show a potential investor and what skills they're looking for then negotiate a deal. Remember start-ups usually don't have a lot of cash so your income will probably depend on the company's future, joining a poor start-up doesn't do you any good. Make sure you don't end up in a position where you accept crap pay but they'll run away with all the profit if it succeeds.

If you're looking to actually start a software company, how do you know if you have a viable market if you don't have any "business experience"? The most important part of a software company isn't the code, it's the business plan. Essential points:

Who are you planning to sell to?
What will be the key selling features?
Why hasn't anyone else done it?
How will it reach the market?
When do we expect product revenue?

If you think I'll just create the product and they'll come, stop. Nobody knows you exist, nobody understands your product/solution and nobody cares. If you haven't got a grip on those, that's okay but then don't quit your day job. Start creating it, try selling it and get some actual experience. That way it'll only cost you time and you'll probably learn that selling it was much harder than you thought. At least that was my limited experience running a start-up, even if we thought we had the product they needed the customer was rarely more than lukewarm.

i've done this

[trybywrench]

The best advice I can give is save a year's salary first, then start with consulting/contracting work while building your product. Maybe you'll be able to stay alive long enough and transition from consulting/contracting to your product. Also, identify what you're not good at and find people who are and will give up their successful career to roll the dice on a shot in the dark ( not easy ). Finally, if you have a spouse make sure they're on board 100% and make sure they understand the odds and what failure means like no house, car, health insurance, savings etc.
"Being successful at these things is about as likely as getting struck by lightning at the bottom of a swimming pool. Well that's a bit much, the odds aren't that good actually." - paraphrased quote i read in some random startup book

If you're on a budget ...

[thomst]

... I'd try a e-rused Falcon 9 - although the Soyuz family DOES offer more configuration flexibility.

As an engineer having been in 2 startups...

[scorp1us]

Don't.

Startups are businesses. You need business acumen and people skills, neither of which are engineer qualities. If you do decide to do a startup, realize your first hire is not yourself, but the CEO who will handle the initial pitch, finance and all that non-engineering jazz. Also know that your priorities as an engineer are out oa whack with that your startup will need, unless you're already used to doing things in an agile manner.

But realize that the traditional startup might sound sexy but it sucks. If you can at all bootstrap it, do it that way. If you never have to pitch to a VC, then that's the best outcome for you, even if it takes a little longer. VC funding is only when you have hurdles to entry that you can't cross on your own, or you are racing to market because of a timeline.

Once you bring in a VC, you no longer own the business, they do, despite whatever equity agreement you have.. You wanted a start-up to be your own master, but having other people's funding makes them the master.