There is certainly a lot of hype. Eight weeks ago I and a friend launched our service (http://billmonk.com/), and on the first day were contacted by a prominent VC. Since then, we've spoken to seven more.
Don't get me wrong. Our product is great, and our users love it - but the attention given to a two-man startup around for such a short period of time was disproportionate to what we had proved to the market at the time.
We decided to hold off on trading a large amount of equity for a relatively small amount of cash - especially when cash isn't needed to bootstrap a company like ours. In our situation, it makes better sense to seek angel funding before talking to VCs when we need money for growth.
Although venture capitalists ARE strangers with candy, they're not necessarily evil or stupid. In this current environment where a lot of small companies are flipped, speculation makes financial sense. Given the potential returns, an investment of a million or two is chump change for these firms. For small companies, that's all you need; what's actually more important is that VCs provide all-important media and business contacts. The bottom line is that you should be wary of the candy, but it can help you realize your ideas. If you are motivated, skilled, and have an idea, this is a great time to join the gold rush.
Five months ago I quit my job as a software developer for Amazon.com to start my own software company with a friend (also ex-Amazon). I heard Paul Graham speak at the Amazon Developer's conference just a few weeks before I left. While he wasn't the reason I took this leap, his arguments helped me make the difficult decision to leave a secure and well-paying job in pursuit of something far more risky.
Here is my personal experience on some of Graham's commonly touted suggestions for entrepreneurs:
Do it when you are young.
I have no wife or kids, no mortgage, and sufficient savings to last for long enough to give entrepreneurism a shot. Paul suggests people do this young not because of any inherent bias, but because the young have very little to lose.
Let the market decide your worth.
The tech startup market is booming. The amount of available funding and interest shown by VCs, and large companies is very attractive to a couple of small entrepreneurs. With several startups having been acquired in the last year, there are rewarding exit strategies on the table too. If you are skilled, and good at your job, why not let the market decide your value instead of your manager?
It's cheap - fund yourself.
The cost of creating value on the Internet is very low. Our product is a web-based application (some may call it Web 2.0), built entirely using open source software. With an abundance of cheap machines, and the fact that most web-apps simply don't need much more than lots of memory and some big disks, our hardwares costs have been low. In fact, we have funded the entire thing ourselves from our savings. With such low startup costs, you don't need to give equity away to try out an idea.
Failure is not that bad.
What really happens if I fail? Well at worst I'll be nearly broke, and back in the job market. But even then, I will have ways to commoditize my failure. Though by no means a given, having entrepreneurism on your resume often suggests some traits that employers look for: self-motivation, willingness and ability to work hard, maturity, technical expertise, ability to prioritize etc. I conducted many interviews during my time at Amazon, and candidates who had tried something on their own and failed were nevertheless, generally more interesting.
Graham helped me assert to myself that the risk calculation I was doing was right enough. At the end of the day, the risk is mine, and the rewards too. We launched the site 5 weeks ago, already have over 3000 users, have been contacted by several VC firms, and have gotten some great press on blogs like TechCrunch, and the Scobelizer. If you're interested, check out what I've been up to at http://www.billmonk.com/, and decide for yourself.
One thing I can say for sure: this is the best job I've ever had.
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Don't get me wrong. Our product is great, and our users love it - but the attention given to a two-man startup around for such a short period of time was disproportionate to what we had proved to the market at the time.
We decided to hold off on trading a large amount of equity for a relatively small amount of cash - especially when cash isn't needed to bootstrap a company like ours. In our situation, it makes better sense to seek angel funding before talking to VCs when we need money for growth.
Although venture capitalists ARE strangers with candy, they're not necessarily evil or stupid. In this current environment where a lot of small companies are flipped, speculation makes financial sense. Given the potential returns, an investment of a million or two is chump change for these firms. For small companies, that's all you need; what's actually more important is that VCs provide all-important media and business contacts. The bottom line is that you should be wary of the candy, but it can help you realize your ideas. If you are motivated, skilled, and have an idea, this is a great time to join the gold rush.
Here is my personal experience on some of Graham's commonly touted suggestions for entrepreneurs:
I have no wife or kids, no mortgage, and sufficient savings to last for long enough to give entrepreneurism a shot. Paul suggests people do this young not because of any inherent bias, but because the young have very little to lose.
The tech startup market is booming. The amount of available funding and interest shown by VCs, and large companies is very attractive to a couple of small entrepreneurs. With several startups having been acquired in the last year, there are rewarding exit strategies on the table too. If you are skilled, and good at your job, why not let the market decide your value instead of your manager?
The cost of creating value on the Internet is very low. Our product is a web-based application (some may call it Web 2.0), built entirely using open source software. With an abundance of cheap machines, and the fact that most web-apps simply don't need much more than lots of memory and some big disks, our hardwares costs have been low. In fact, we have funded the entire thing ourselves from our savings. With such low startup costs, you don't need to give equity away to try out an idea.
What really happens if I fail? Well at worst I'll be nearly broke, and back in the job market. But even then, I will have ways to commoditize my failure. Though by no means a given, having entrepreneurism on your resume often suggests some traits that employers look for: self-motivation, willingness and ability to work hard, maturity, technical expertise, ability to prioritize etc. I conducted many interviews during my time at Amazon, and candidates who had tried something on their own and failed were nevertheless, generally more interesting.
Graham helped me assert to myself that the risk calculation I was doing was right enough. At the end of the day, the risk is mine, and the rewards too. We launched the site 5 weeks ago, already have over 3000 users, have been contacted by several VC firms, and have gotten some great press on blogs like TechCrunch, and the Scobelizer. If you're interested, check out what I've been up to at http://www.billmonk.com/, and decide for yourself.
One thing I can say for sure: this is the best job I've ever had.