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Archive for the ‘bootstrapping’ Category

23 Great Websites for Entrepreneurs: Plus Some Radical Advice from an Entrepreneur-Bootstrapper

Posted by Bob Warfield on September 24, 2014

advice_bad timeI recently came across two giant lists of websites for entrepreneurs, courtesy of Jason Lemkin (whose blog is listed in both):

Inc.com 50

Forbes 100

Now for some radical advice: the vast majority of the sites listed in those publications won’t help the vast majority of entrepreneurs at all.  In fact, many of them will be counterproductive in the extreme depending on what your goals are.

I can already hear the refrain:

Whoa, hold it right there Bob–them’s fightin’ words!

True, to a certain extent, but hear me out before you pass hasty judgement.

The vast majority of the sites listed, and I went through both lists carefully, are of interest to those entrepreneurs that are dead set insistent on going the path of Venture Capital.  Nothing wrong with that–I’ve been down that road on the majority of companies I have founded–3 were VC funded and 1, my latest is bootstrapped.  But I always ask every would-be entrepreneur I meet why they want to do a VC-funded startup and I wish I had gotten around to bootstrapping a lot sooner than I did in my life.

I’m not here to sell you on bootstrapping versus VC.  I have other articles that talk about my bootstrapping experiences and there are certainly many who will talk to the virtues of each.  But what I will tell you is this–Venture Capital does not equate to success for entrepreneurs, you can be wildly successful without it, at least unless you need to do a deal that is tremendously world changing or that makes you hundreds of millions of dollars.  If millions of dollars and running your own show will suffice, bootstrapping is an easier and less risky way to get there.   Most of the good VC’s, the ones you’d want on your board, that I talk to will freely admit this.  They encourage lots of entrepreneurs whose ideas and companies are not suited to the VC model to carry on without VC.

When you show an idea to a VC, they are predisposed to see it in VC terms–would it be a good investment for their portfolio?  A lot of their advice is going to boil down to pushing the idea in a direction that makes it a better investment for VC, and this is not necessarily a direction that makes it a better investment for the entrepreneur.  Because of that, I think you, my entrepreneurial friend, need to figure out whether you want to do a pure bootstrap or bootstrap your way into a VC deal as early as possible.   Ideally, you want to figure it out from the start.  If you’re going to do a pure bootstrap, take those long lists of websites for entrepreneurs and cull them carefully.  Most of the blogs written by VC’s, while they can be fun to read, have no bearing or guidance to speak of for your venture.  You know, the one you’re funding out of your own pocket that can’t afford to get a bunch of eyeballs now and figure out how to monetize later.  There are sites listed that want to walk you through all sorts of legal things and other artifices that are really only relevant when there’s quite a lot of money in play.  Not necessarily money in the form of revenue, but money invested and the expectation of Big Money in the future.

So forget most of the VC authored blogs.  Forget blogs that seem to be mostly telling you how to raise VC.  If you don’t have the real deal, you can’t game the VC’s well enough to fool them and you’ll regret it if you do fool them.  Forget most of the blogs by guys who were successful VC founders who want to tell you what worked for them or what they think about everything.  Most of it is too high level and many first time success stories have no idea what they did right versus what was luck.  Forget the inside baseball and gossip rags. AllThingsD and Techcrunch have almost nothing to tell you if you’re not doing a VC-funded startup.  You don’t care who got funded for how much or who bought what for how much.  You don’t care about the latest Culture du Jour piece.  Forget the musings of rich guys who’ve forgotten more about being an entrepreneur than you’ll ever know.  Their vacations to Lake Cuomo may be fun to hear about, but how is that really helping YOU to succeed?  And skip the self-help pump-you-up pieces.  If that stuff works for you, great, but attitude is not enough, and if you don’t really have the eye of the tiger deep down, you better get it before you start down the entrepreneurship road.  You get the idea of what I want to leave out from those big website lists.  Yes, it’s radical and harsh, but what should be left in are sites that give you real actionable insight into how to grow your business.

Let’s face the other thing–the vast majority of small businesses that start up in the world don’t have the luxury of VC money.  They’re restuarants, retailers, machine shops, auto garages, and a host of other things.  This is the world my own bootstrapped company (CNCCookbook) works with.  These people could care less about things that will only work if you can invest millions of dollars over time.  They don’t ever expect to be running a billion dollar company (or maybe they do and don’t want to give away most of it to their financiers).  They’re having the time of their lives starting and running their own businesses.

It is for the audience of those people (having the time of their lives running their own businesses) as well as for any Venture-funded businesses that are interested, that I have put together my own high octane feedstock of sites that will help you build your business.  These are tried and true sites that I read religiously because their insights are actionable and they make me think.  You want deep strategy and tactics that can be made to work for any business, not just VC businesses.  They are in no particular order, so here goes.

Saastr

I have to give Jason the nod here.  After all, he did put me on to writing this article and I do read his blog religiously.  There are many ideas there that are only suited to VC startups, but there are also ideas that I’ve found actionable for my own business.  Jason is a VC, but he did a number of startups before that and it is his operational knowledge that he largely shares.  We go back and forth and I often disagree, but it is always interesting.  Do a search here on Smoothspan for “Jason” and you’ll see some of what I have written about his thinking.  Better yet, just subscribe to his blog in your reader.

Seth Godin’s Blog

If you don’t read anything else, stop, do not pass Go, do not collect $200–read Seth Godin’s Blog!  The daily posts are short and pithy.  Taken in total they constantly explore every aspect of Godin’s unique tribal approach to marketing.  He understands marketing at its core in the way the every small business needs to understand it.  Read his stuff.  Let it provoke your thoughts.  Let it seep in constantly.  It will do you no harm and probably a lot of good.

Firehose Press

This blog is a total unknown.  It’s unadorned and has no editorial content of its own whatsoever.  It’s one of my blogs.  I list it early in this list, because it is a shortcut of sorts.  You see, Firehose Press is what I’d call a “clippings” blog.  I post a brief excerpt of every blog article about building a business or marketing and sales that was valuable to me on Firehose Press.  Believe me, I have a couple of hundred blogs in my reader and having somebody curate all that for you can save a lot of time.  The only question you need to ask is whether my taste in curation results in articles helpful to you.  The answer is easy enough–go look at it and decide.

Signal vs Noise

These guys have some of the original great material on Bootstrapping that really got me fired up to do a Bootstrap.  They are not as prolific on the topic as they once were, but they’re still a good read.  Aside from bringing Ruby on Rails into the world, they’ve built a great company and lifestyle for themselves.  All entrepreneurs should be so lucky.  If you’re on the road to VC and read blog’s like AVC, the corollary for the bootstrapper would be blogs like this one.

Techmeme

I deleted so many other blogs of limited value to me (Techcrunch, ReadWrite, and many others) simply because Techmeme catches and serves up their best stuff.  I scan the headlines quickly and frankly delete most of it.  But at least if I’m off to lunch with a fellow Silicon Valley cohort, I will have heard about the trending topics.  And frequently, I latch onto a whole new source of the really good stuff because it popped on Techmeme.

Totango

These guys are on to some radical thinking.  They want to tie marketing (of a sort) with the customer experience as it unfolds pre- and post-sale.  Being able to do this well is one of the many things that I think will really separate the awesome products from the also-rans.  Read it and think about what they’re doing and how it applies to your software.  I certainly did!

KissMetrics

Analytical marketing insights and ideas.

The Buffer

Productivity hacks for marketing and social media.  My business doesn’t get great value out of Social Media, though I have experimented with it a lot.  Having a resource that helps me squeeze a lot out while investing as little as possible is helpful.

Succesful Software

Andy Brice is a fellow bootstrapper who often has some great insights for that life, at least for software bootstrappers.

Moz Blog

When the Gods of SEO speak, it usually shows up here.  As a dedicated content and inbound marketer, I hang on their every word.  Seriously, SEO is easier than you think and you can do it yourself without a high paid consultant if you pay attention.

SaaS Growth Strategies

More good basic marketing for software companies.  Much of it would work for many kinds of companies.

QuickSprout

Neil Patel can have a lot of good insights to share, but I warn you in advance, you have to penetrate his wall of Marketing Spam to get there.  His site demos every trick in the book to sell you while you’re trying to dodge all those “Let me close you now!” bullets and get a little value.  It’s worth it, but don’t say I didn’t warn you!

Marketing Experiments

Sometimes I just need an idea, something quick to implement or A/B test.  You know, a marketing “snack” I can get done quickly and see if it helps.  Plenty of inspiration for that here.

Marketing Technology Blog

It’s not just about Marketing Technology–lots of actionable strategy and tactics may be found here.

Jeff Bulla’s Blog

Tons of marketing and selling ideas for small business.

Inbound Hub

I love inbound marketing, and these guys popularized it and IPO’d a company on it.  There’s good info here.  With that said, quality seems to have diminished a bit in favor of quantity.  Scan the headlines and cherry pick–there’s still plenty of ripe tasty insights to be had here.

I Love Split Testing

More A/B testing ideas to snack on.  Your business needs to constantly be trying new experiments to optimize its marketing.  Get this kind of feed stock stimulating ideas ASAP.

Heidi Cohen

Great ideas from Heidi for Content Marketing.

Digital Marketing Blog

Every business needs more growth.  Digital Marketing is the cheapest way to get there, so take in all you can stand about the subject.

CopyBlogger

More great ideas for Content Marketing.

Convince and Convert

Content Marketing and Social Media.  Great content on those topics and surprising candor about how some of these things are not always the perfect Silver Bullet.

ClickTale Blog

Take a sexy technology that tracks what user’s are doing on your site almost better than the users even realize and you get some worthwhile insights.

Smoothspan Blog

Another shameless plug for my own content.  Smoothspan frequently covers Strategy as it pertains to this world of entrepreneurship.  The thing about good strategy is its hard to come by, but it is so valuable when you can get a true strategic insight.  Or, as I heard someone say one time:

Strategy is what we do to make winning easy.

I’m a student of Strategy, so I write it up often.

Conclusion:  What’s Here and What’s Missing?

If you made it this far, you will realize that a tremendous number of those websites have to do with helping your business grow.  Many of the things on the Forbes and Inc lists had little to do with that.  They might refer you to sites with CPA terms (I kid you not) or perhaps sites that tell a small business how to secure health insurance.  These are all valuable things, I’m sure, but they’re not life-threatening for small businesses and entrepreneurs.  They’re not problems that can ultimately never be solved, only worked away at indefinitely.  Growth is that sort of problem.  It is both life threatening and a problem you will probably never solve.  You’ll always want more growth and if you stop trying to drive it, your business will likely slow down.  So get used to the idea of constantly absorbing and evaluating new ideas for growth.  It’s all part of being an entrepreneur and it is the oxygen your business needs to keep going.

Posted in bootstrapping, business, strategy, venture | Leave a Comment »

Best Way to Succeed as a Solopreneur: Go For Fewer Customers

Posted by Bob Warfield on July 29, 2014

I’m reading with interest some posts that are hot on Techmeme at the moment from Jared Sinclair and Marco Arment about succeeding with iOS apps and as a Solopreneur.  Jared’s blog post is a cautionary tale for those who would like to bootstrap a small venture well enough to quit their day jobs.

Many weigh in with various comments and based on his latest post, it looks like Jared was inundated with a bunch of notes from people who thought he just didn’t market the app enough.

I’ve been a solopreneur with some part-time helpers trying to make the gig into a multi-person bootstrap for some years now.  I’ve managed to create a business that now throws off more cash than I’ve gotten at any Day Job I ever had short of being an exec at a public company.  It’s been an extremely happy experience and I thank my lucky stars and my awesome customers every day for making it possible.  I want to talk through what Jared has bravely reported about his venture and compare it to what’s different about my own CNCCookbook and talk about how I think those differences matter to a successful solopreneur.

First the Results of Both Companies

Jared starts out presenting his financial results from his iOS app, Unread:

FirstYearSalesUnread

Unread Cumulative Sales in the First Year…

It’s pretty easy to see why Jared is unhappy–most of the action happens shortly after he shipped the initial application.  Yes, there’s steady growth afterward, but the actual sales per week or month (remember, the graph is cumulative) had to be pretty disappointing if you want to live off that income.  The app only costs $4.99, so Unread has actually been extremely successful in terms of the number of customers it has attracted–looks like somewhere between 6,000 and 7,000.

I wanted a way to provide some similar insight into CNCCookbook’s apps, but I’m not as interested in Jared in giving away my exact finances (sorry folks, you’ll just have to do some back of envelope calculating to figure it out).  Here is the cumulative graph of software license years sold for CNCCookbook’s software:

CNCCookbookCumLicYearsSold

CNCCookbook Cumulative License Years Sold…

I’ve been at it for a few years now, and the growth has been steady, almost hockey-stick-like–this is a very happy business!  The big bump between 10/22/12 and 10/22/13 reflects the launch of our second product.  I’m hoping to get another bump like that in the next 6-12 months as I launch our 3rd product.

With all that said, I want to make some suggestions about what I think has made CNCCookbook successful.

Suggestion #1:  Lead With Subscription Pricing for Recurring Revenue

First, what is a “software license year sold?”  CNCCookbook sells both subscriptions and perpetual (you buy the software for life with one payment).  Recurring revenue is essential for Solopreneurs because it means they’re getting new revenue without much new work other than keeping the software vibrant and useful.  Getting new customers is hard work.  In a minute I’ll discuss how CNCCookbook goes about it, but suffice it to say I have created a business where my biggest problem is having enough software to sell my customers moreso than getting the new customers.  Part of that is due to the recurring revenue stream.  If you’re a fan of the SaaS/subscription model as I am, you’ll realize that once one of these revenue engines gets up sufficient momentum, they’re almost unstoppable.

So, my graph shows how many years of subscription were cumulatively sold for both products over time.  I plugged in a figure of “6” for any lifetime sale because that’s more or less how I think about my lifetime pricing.

Suggestion #2:  You’ll Want Perpetual Pricing Too, and the Subscription Helps Justify a High Price For It

 FWIW, I mostly wind up selling the lifetime version during sales, but that’s okay too because having a fairly expensive lifetime version does a couple of things.  One, it addresses the needs of customers who just don’t like getting tied to a stream of payments.  This is a very real audience, and if you don’t give them an out, you’re not going to reach them.  Why not choose a perpetual price where they’d have to keep resubscribing for so many years before you come out ahead that everyone can see it as a win-win situation?  Why leave the perpetual hole open for a competitor to come in and take over?  Once you have both pricing models, it gives your customers options.  Do they prefer to preserve cash flow?  My subscriptions do that, just like the lease vs buy decision on a car.

Suggestion #3:  Find the Sweet Spot on Price and Insist On It.  You Probably Want Fewer Customers Willing to Pay More.

My first product offering was $69 for one year.  It seemed like a lot to me at the time, but it wasn’t.  It was actually less than the product was worth–I raised that to $79 with no impact on the units whatsoever.  More importantly, it was and is too low for a business you want to have be your sole occupation.  This gets me to the point of my headline–figure out a business model that requires as few customers as you can easily sell to achieve your financial goals.  Jared’s Unread sells for $4.99–pretty typical for an iOS app.  But it took him almost a year of very hard work to produce it and it isn’t paying the bills.  It’s not really a matter of promotion–he has a ton of customers.  It’s a matter of the customers not paying him enough cash for each sale.

A solopreneur can only touch so many people.  You can only get the word out so far.  There is an upper limit on how many people you will have a chance to sell to when you launch, and on how fast you can grow that audience over time.  You need to be cognizant of that fact and find a product opportunity that can be priced accordingly.  Be brutally honest about how many customers you can close.  Forget models that require too many.

Advertising?  Fuhgeddabout it.  No hope in heck.  I’ve estimated that charging for your product is about 2000 times more effective than giving it away free and relying on advertising revenue.  Why make your job 2000 times harder?  It’s so attractive to sell Free until you realize the sheer magnitude of scale you must achieve.  Those are VC-only deals, folks.

Cheap Phone Apps.  Based on the information I’ve seen, Jared’s information, the problems with finding apps in the app store, and the platform owner’s huge tax of 30% on sales, I am strongly thinking phone apps are not a good target for bootstrapping or solopreneurs.  It’s too hard to market the apps, the platform owner has too much control over the walled garden, they get too big a share of your revenues (30% is huge if they’re not driving huge demand your way, and they’re not), and you aren’t able to charge nearly enough in most cases.

Phone apps have been a dilemma for me in my own business.  My audience would love one.  I have done the work to actually keep one code line running on PC, Mac, iOS, and Android, and there has even been a prototype run on iOS.  But the thought of the work involved finishing the app and questions of whether I’ll be cannibalizing my existing sales with sales that have a 30% tax to Apple or some other big guy has given me pause.  The project has been on indefinite hold while I look at other more promising ways to invest my time.

To get an idea of what you need to charge, look at some successful bootstrappers.  Take Basecamp–it’s $150 a month.  There are cheaper plans, but they limit the number of projects.  Eventually you will be likely to upgrade.  At $150 a month, you only need about 140 customers to be making $250K a year.  I see all these Solopreneurs talking about their $60K a year businesses and wonder why they aren’t aiming higher.

Or, if you have something with more mass market appeal, say like Smugmug, you an charge $40-300 a year.  It’s going to take a lot more customers than Basecamp, but if their average sale is say $60 a year, that’s about 4200 customers to do the $250K a year.  Given how many love photography, that again seems like manageable adoption to be able to succeed.  Either number is a lot fewer than Jared has already sold.

I mention that I thought my pricing was too low and I mean it.  $79 a year requires me to find 3200 customers to get to $250K per year.  It can be done, but I surely didn’t get there in 1 year or even 2 years.

If I had my druthers, I’d be looking for a niche that needs circa 1000 to 2000 customers to get to that $250K.  Hence, we are charging $125 to $250 a year or at least $99 a month.  Look around.  There are quite a few SaaS businesses at $99 a month.  I use a bunch of them to help me with CNCCookbook marketing–Wordpress hosting service Page.ly, SurveyMonkey, MailChimp, my shopping cart provider, etc., etc..

Things are priced where they are for a reason, and not simply because it’s what the market will bear.  It is not only what the market will bear, but it is also what can support a happy healthy growing business.

Suggestion #4:  Debug the Marketing and the Market Before You Ever Write A Product

Many solopreneurs are software developers.  I tell my non-developer friends about my business and they are envious, but can’t see how a marketer can get a product written without paying an engineer, at which point they’re no longer solo.  Engineers, OTOH, seem to think they can bump along and do a decent job of marketing.  As my marketer friends are fond of saying–everyone consumes marketing so everyone thinks they are an expert on it.

Here’s the thing: as a software developer, you know you can get the product built.  That’s pretty low risk.  It’s fun to dive in and start slinging code and pretty soon the demo starts showing some life.  But so what?  As I said, you know you can get the product out.  What you don’t know are two very important things:

1.  Are you solving a problem anyone cares about?

2.  Can you successful reach that audience to sell them your product?

Now here is the truly amazing thing:  you can answer both questions with very high confidence as a solopreneur in a relatively short time.  You can even do it fairly comfortably while holding down your Day Job–even better.

There’s a short list of tools and skills you’ll need to master that I’ll get to shortly, but in order to solve those two big marketing problems, you need one critical talent:

You’ve got to be able to tell a story people want to listen to, and you have to be able to do it in writing.

If you can’t tell a story people want to listen to, I think your future as a solopreneur is probably not going to go well because you’re going to be left either needing someone else to tell your story or just buying advertising.  I keep playing with advertising every six months or so.  I am very analytical and well versed in how to do it.  I have conversion hacked landing pages with great results and done tons of A/B ad testing to try to improve the results.  My conclusion each time I try the experiment is that it just isn’t very profitable.  It costs me so much to sell a customer using AdWords that it is hardly worth it.  I’ve talked to a slew of bootstrappers, and their mileage varies.  Many report something similar.  Many do not keep good enough analytics to even know, they just budget for it and spend the money, hoping it will work.  I guess if you want to depend on ads, this is also something you can know up front.  You can try ads that lead to a page and see what it costs you to get people to that page.  The trick is in what they do when they get there.  In my case, they sign up for a free trial.  That’s one conversion event.

The next thing is to convert them from the free trial to a paying customer.  That’s a second conversion event.  I do very well on the latter–about 20% of free trials become paying customers, which is very decent.  Where I fail is getting enough ad click throughs converted to the free trial relative to what the ad costs.  You can do the math:

1.  The ad costs $1.50 per click through, for example.

2.  The page converts 27% to click through to the trial signup.  Conversions for me are better if they don’t sign up on the landing page–that’s being too pushy for my audience.

3.  Once on the trial page, 25% successfully register for the trial.

4.  As mentioned, 20% of the trials convert to paying.

So if I get $79 for the sale, I can afford to pay $79 * 20% * 25% * 27% = about $1 to break even.  $1.50 is very unprofitable.  Even if I can buy ads for 50 cents, which I very seldom can, it still seems like I am giving Google the Lion’s Share of my hard work.   OTOH, if I am Basecamp, all that changes because I am looking at an annual value of $150 * 12 = $1800.  I can afford to pay quite a lot for advertising in that case.

Working through those numbers is how you debug advertising as a marketing possibility.  There’s still one other big advertising drawback even if you can afford it: it doesn’t create a sustainable marketing asset.  Once the ad has run, you quit getting value from it and you must spend more money on ads.  That’s one reason why I much prefer inbound or content marketing.  If you create great Evergreen content, and own the searches for those subjects, you own a marketing asset that keeps on giving without your having to do much.  You can spend time adding even more Evergreen content.  That model scales well for the solopreneur and small resource-limited bootstrap.

With that model, you’re relying on giving away great free information to attract people via referrals and search engine traffic.  This is the one you can really debug well without even starting a product.  This is the one where you need to be able to tell a story.  The reason is that you can start a blog aimed at your audience with an email mailing list for that blog and find out what works.  Do they care about a problem you want to solve with a product?  Write articles about the problem and see if anyone comes to the party.  Can you reach this market?  Go forth, read the relevant blogs, visit the relevant social sites, and find out what they’re talking about.  Find out what they’re interested in.  Start talking about that on your blog.  If they show up, start building your readership.  Collect their emails and start a weekly blog digest newsletter. Track your progress.

Now do some more back of envelope.  How many do you need in your fold?  I’ve typically been able to sell 4 or 5% of the folks on my email newsletter a new product.  So if I must sell 1000 to reach my financial goal, I had better have 20,000 folks reading my email newsletter.  I recommend you spend 6 months to a year building up your online content (blog) and building your newsletter before you even start writing your product.  Get a sense of how long at your current growth rates it will take you to have enough that you can meet your financial goals and plan it so that by the time you finish the product, the audience are already there, eating popcorn in their seats, and waiting to see what you can offer them.

This is what I mean by debugging the Market and Marketing before you start a product.  Nothing could be more frustrating than to turn in a ton of cubic hours building a sweet product only to have it fall far short of your financial goals for it.  You need to discover whether you can tell stories well (or write ad copy or whatever) enough to attract an audience without a product.  If you can do that and give them a sweet product,  you’re much more likely to succeed.

What about those skills and tools I mentioned?  Yeah, there’s time to figure all that out too during that 6 months to a year when you start creating content.  You have to figure out how to run a blog, (I have 4 or 5 kicking around here somewhere).  Just go get WordPress, don’t even mess with anything else.  Figure out how to use plugins.  Don’t write custom code, that’s a distraction.  You need to figure out how to collect the emails.  That’s a WordPress plugin plus an email service.  I use AppSumo’s List Builder (not here, on the CNCCookbook blog) and MailChimp.  Then there’s all the techniques of creating landing pages that convert and SEO and all that jazz.  It’s not that hard.  Seriously.  I have a clipping blog I call Firehose Press.  Every single great marketing how-to article I have ever read is there.  Read it and digest it and you will know nearly everything I know about marketing.  Go back over the articles in this Smoothspan blog.  There’s plenty of posts that chronicle various epiphany’s I’ve had about marketing along the way.

Conclusion

I didn’t write this article to knock Jared’s efforts–he’s done well by getting so many customers.  He obviously built a sweet app.  If I were to suggest differences, it would be in two areas.  Jared had wanted to succeed with his launch and with blog and social media mention.  In my mind, that’s too passive.  You have to create an engine that you can control with a throttle you can push when you need to.  My throttle is to write more and better content.  I suspect that the lack of controller marketing that could be invested in is what made Jared’s sales graph so flat, while a price that was too low is what made it so hard to live on the revenue from the product.

I didn’t write it to beat my chest about what I’m doing.  It doesn’t matter, it isn’t that big a thing, and I don’t believe it will help CNCCookbook in any way despite what some marketing folk say about such things.

I wrote it because I love being a solopreneur and bootstrapper.  I think it is the greatest thing since sliced bread.  I’d really like to see as many people as possible get a shot at it, so I’m trying to pass along what I’ve learned along the way.

As always, there are many strategies that work.  I certainly don’t have the One True Path.  But if I’ve helped clarify things even a little bit, then I will have accomplished what I wanted and I thank you for your patience reading through the post.

Posted in bootstrapping, business, Marketing, strategy | 5 Comments »

Authentication as a Service: Slow Progress, But Are We There Yet?

Posted by Bob Warfield on July 11, 2014

BankVaultSmallAuthentication as a Service solves a problem every Cloud Developer, mobile or desktop, has to solve.  As one player in the space, AuthRocket, puts it:

Do you really want to write code for users, forgotten passwords, permissions, and admin panels again?

To that I would add, “Do you really want to have to be a world class expert on that stuff to make sure you don’t leave some gaping security hole out of ignorance?”  I think the answer is a resounding, “NO!” to both questions.  Why do it in this world of Agile Development, Lean Startups, and Minimum Viable Products?  It’s one of those things everyone does (and should do) pretty much the same way from a user’s perspective, so there is no opportunity for differentiation.  You have to do it right because the downside of security problems is huge.  You have to do it right up front to protect your customer’s data and your investment (so nobody gets to use your products for free).  There’s basically very little upside to rolling your own (it’ll only slow you down) and tremendous downside.  Hence, you’d like to buy a service.

I keep going around this block for my own company’s (CNCCookbook) products, and I surely would like to get off that merry g0-round.  I wanted to buy this some time ago, and have written about it for quite a while.  For example, in an article I wrote 4 years ago on PaaS Strategy (Platform as a Service), I suggested login would be an ideal service for a pass to offer with these world:

Stuff like your login and authentication subsystem.  You’re not really going to try to build a better login and authentication system, are you?

I sound just like AuthRocket there, don’t I?  I’m sure that’s not the earliest mention I’ve made, because I’ve been looking for this stuff for a long time now.  As I say, I had to roll my own because I couldn’t find a good solution.  I would still like to replace the solution that CNCCookbook uses with a nice Third-Party service.  I only have few very generic requirements:

-  It has to offer what I need.  Basically that’s Email + Password login with all the account and forgotten password management interactions handled for me.  It would be very nice if they do Federated Login using the other popular web services like Amazon, Facebook, Twitter, Google, or whatever.  It would also be very nice if it could do 2 factor login.  The latter two are optional.

-  It has to work well.  I judge this by who has adopted it and how it is reviewed.

-  It has to be here for the long haul.  I’ll judge this by size of customer base and quality of backers.  AuthRocket, for example, is still at the invitation-only Beta stage.  That’s too early for me.  I have mature products and don’t want to have to change out this service too often.

-  It has to be easy for me to access the API’s.  I prefer a nice RESTful API, but I will take a platform-specific API for my chosen development platform: Adobe Flex.  And no, I don’t want to debate that platform, it has worked fabulously well for me, the products are mature, and I am not looking to switch.

-  It has to be easy to tie it back to securing my data in the Amazon Web Services Cloud.

-  Optional Bonus:  It helps me solve the problem of disconnected data access.  My apps are Adobe AIR apps.  You download and can run without a web connection for a period of time.  This is important to my audience, but means I’ve got to use data models that keep local copies and sync with the Cloud when they get connected.

While my apps are not yet available on iOS or Android, all of those things are almost exactly the same problems any Mobile App developer faces.  Therefore, this ought to be a hotbed of activity, and I guess it is, but so far, I still can never seem to find the right solution for me, and I don’t think I’m asking for anything all that crazy.  But, I have yet to find a solution.  Let me tell you a little bit about my 2 most recent near misses.

Amazon Cognito

I was very excited to read about Amazon’s new Cognito service.  At CNCCookbook we’re big Amazon believers, and use all sorts of their services.  Unfortunately, at least until Cognito, they didn’t really have a good service for solving CNCCookbook’s authentication problems.  They had IAM, which is a very complicated, very heavy-weight, very Big Corporate IT kind of solution.  It looked kind of like maybe you could do it if you had to, but you’d still wind up writing all the darned password management stuff and it looked like it was going to be a real ordeal.  Mostly, I think of IAM, as the tool used to define roles for how broad classes of users can access the various other Amazon offerings.  I wanted another service of some kind to be the sort of simpler, friendlier, front end to IAM.  Enter Cognito, and it sure sounded good:

Amazon Cognito lets you securely store, manage, and sync user identities and app data in the AWS Cloud, and manage and sync this data across multiple devices and OS platforms. You can do this with just a few lines of code, and your app can work the same, regardless of whether a user’s devices are online or offline.

You can use Amazon Cognito directly from your mobile app without building or maintaining any backend infrastructure. Amazon Cognito handles secure app data storage and sync, enabling you to focus on your app experiences, instead of the heavy lifting of creating and managing a user data sync solution.

A guy like me loves the part about, “You can do this with just a few lines of code” followed by “without building or maintaining any backend infrastructure.”  Now that’s what I’m talking about, I gotta get me some of this!

It’s nearly all there:

-  Amazon is an outfit that can be trusted for the long haul.

-  REST API’s are no problem, that’s how Amazon prefers to operate.

-  Tie back to other Amazon Web Services?  Puh-lease, who do you think you’re talking to, of course one Amazon Service talks to the others!

-  Sync?  Yeah, baby, that’s what Cognito is all about.  More potential time savings for yours truly.

Oops, just one little shortcoming:  it only does Federated Login via Amazon, Facebook, or Google.  That’s cool and all, but wheres my Email + Password login so I can seamlessly move customers over to it?  Maybe I missed it, maybe it’s coming, or maybe Amazon just doesn’t think it’s important.  Can I live with forcing my users to make sure they have either an Amazon, Facebook, or Google account?  Yeah, I guess maybe, but we sell a B2B app and it sure seems kind of unprofessional somehow.

Amazon, can you please fill this hole ASAP?

Firebase

I hear fabulous things about Firebase, I really do.  People seem to love it.  It’s chock full of great functionality, and on the surface of it, Firebase should fit my needs.  Yet, when I dig in deep, I find that the login piece is kind of a red-headed stepchild.  Yeah, they advertise Email + Password Login, and they even tell you how to do it.  But there’s no RESTful API available for it.  They list all the right operations:

-  Login, and returns a token
-  Create a new user account
-  Changing passwords
-  Password reset emails
-  Deleting accounts
etc.
However, it appears that those things are handled by a client library which is in a very dev platform specific format.  If you use one of their chosen platforms, it’s ok.  If not, you can only use their rest API’s for the Cloud Database–no login functionality.  That’s going nowhere for me.  It would’ve been so much nicer had they packaged what’s in the client library in their Cloud and provided RESTful API’s for the functions I’ve listed.  As I told them when I made the suggestion, that makes their offering accessible to virtually every language and platform with the least effort for them instead of just the few they support.
Conclusion:  Crowd Sourcing?
Hey, I’m open to suggestions and the Wisdom of the Crowd.  Maybe someone out there knows of a service that meets my requirements.  They seem pretty generic and I’m frankly surprised I still can’t find such a thing after all these years of building almost anything you can imagine as a service.  We’re not very far away from it.  Either Amazon or Firebase could add the functionality pretty easily.  I’m hoping maybe I’ll get lucky in the next 6 months or so.  If anyone knows the right people in those organizations (or their competition), pass this post along to them.

 

 

Posted in bootstrapping, business, cloud, mobile, platforms, saas, service, software development | Leave a Comment »

Let’s Try Another Verse of Your SaaS Company Does Not Need a Sales Force

Posted by Bob Warfield on May 23, 2014

MorpheusNoSalesForceIt’s time for another installment of what some of the Enterprise Irregulars have called the Jason and Bob show.  Jason and I have disagreed on a fair number of issues over time, though we have also agreed on a lot.  Jason’s had a great run and is now in the rarefied atmosphere of VC’s.  All of his material is thought provoking and well worth a read.

Today, we’re going to talk about Outside Sales or indeed the question of whether SaaS companies must have a sales force at all, inside, outside, or otherwise.

Jason’s post today is “Inbound or Outbound Sales? The Answer is Yes.”  In it, he argues that

There’s a meme, a CommonThink, among certain segments that Outbound Sales is Bad, or at least, a Little Unseemly.  And maybe a lot bit Old School.

That we’re in a new world of sales, a new consultative world, where leads come in, prospects can try and learn before they even talk to a human, and then, a sales rep thoughtfully answers questions, models business process change, and helps them decide how and why, and if, to buy.

And that’s true.  We are in that world.  Inside sales is terrific.  Warm leads are great.  Live trials of easy-to-use-and-deploy web services really have changed the game.

And yet …

The reality is, by revenue, this isn’t the way the majority of the world buys.

My role here today is to cast a dissenting vote, and to explain why.  In fact, this one’s been argued between us before so I’ll just refer you gentle readers to my original response to get the ball rolling:

Does your SaaS company have to have a sales force?

In that article I make the case that, no, your SaaS company doesn’t automatically need Outside Sales. It’s a function of who you need to sell to and that’s a function of what your solution costs. The more money involved in an individual sale, the more likely you need Outside Sales.  This isn’t really news or something I made up, by the way.  I learned it at the knee of one Geoffrey Moore, he of the Chasms and Gorillas and such.  I find it makes a lot of sense to think about how you need to sell based on the size of the transaction involved.  In hindsight, it’s obvious that a very expensive purchase carries a lot of risk and that a large organization will need to involve many people and ultimately a highly placed decision maker to get it done.

Jason does tip his hat to this notion with some remarks about selling to SVP’s, but I believe it’s something that startups need to think really carefully about very early on.  Horses for courses. What’s the right way to sell for my specific product and opportunity?  You need to make a conscious choice during the very early stages of the startup about what your strategy will be in this respect, because it’s going to have a profound impact on what sort of company you’re building, what kinds of skills you will need, and even the capital needs of your venture.

Jason mentions the “meme” that Outbound Sales is Bad.  Surely that’s damning with faint praise, but there are sound reasons why that meme is out there.  He says, “by revenue, this isn’t the way the majority of the world buys,” referring to purchasing without the need for Outside Sales.  Au contrare, Jason.  I don’t believe it and I have never seen any data to support it.  In fact, you don’t have to look far to see that the biggest revenue is associated with offerings that don’t require either inside or outside sales. Think Apple, Walmart, et al. Their selling is totally self-service and marketing-driven. Not software? How about Google or Facebook? Oh, not business enough? What about Github, Amazon Web Services, or many other ventures that are hugely successful.  While we’re at it, let’s look to where the majority of the profit, not the revenue goes and the differences are even more stark in favor of finding models that don’t require Sales.

What if that’s the real opportunity–start something that works and doesn’t require Outside Sales.  Or if you prefer, consider the potential for disruption that going into a market with a product that can work without Outside Sales offers. That’s exactly what PC’s did to the Minicomputer vendors. The Rolex-clad, scratch golfing, Armani suited crowd with good haircuts laughed at the little computer stores and the pathetic IBM PC.  Ken Olson himself laughed at them all the way to the point where DEC disappeared and was never heard from again and in a very short span of time.  Hitting an Outside Sales-driven industry with a solution that requires no sales creates the Mother of all channel conflicts for the poor sales-driven company.  It is just as toxic to companies with Sales Forces as Subscription models are to Perpetual License models.

The other reason the meme is strong is capital requirements.  Outside Sales-driven opportunities are going to require more capital to finance their longer sales cycle.  It’s unavoidable when you have to wind your way through the organizational complexity that’s there to stop a company from foolishly spending its money without proper checks and balances on your expensive solution.  SaaS itself is already capital inefficient because it pulls expenses forward and pushes profit out over time relative to getting it all up front in the Perpetual License model.  We live with it to get to the pot of gold at the end of the rainbow, but what if we could at least mitigate it by selling a product cheap and easy enough that it didn’t need Outside Sales or even Inside Sales?

That’s how the companies I’ve mentioned got to be so big so quickly.  That’s why this so-called meme is a real business strategy that’s disruptive and must be considered by any startup.

Figuring out how to leverage strategies like this in new markets where you can be supremely disruptive to the incumbents is what successful startups are all about.  Don’t be a slave to tradition.  You’re not here to build another SAP.  You’re here to build the next generation by disrupting SAP and Oracle.  SaaS is probably not enough to do that, though some argue otherwise.   I think many of those are confusing disruption with room at the bottom (great link from Jason, BTW).  The thing is, everyone’s doing SaaS now, so what’s different about your story?

 

Posted in bootstrapping, business, enterprise software, Marketing, strategy | Leave a Comment »

Evil VC Seeks Minions for World Domination

Posted by Bob Warfield on January 30, 2014

EvilSeeksMinionsIf we substitute “Venture Capitalist” for “Evil Genius”, the placard on the right describes the Silicon Valley Startup Culture perfectly.  Yes, you young hopefuls, your friendly neighborhood (that’d be the Sand Hill neighborhood) VC really does expect you to sacrifice your lives in a play for world domination.  They don’t care about building a nice little $100M a year software business–that’s peanuts, doesn’t move the needle on the fund.  Son, it’s just not enough tonnage.  Must be prepared to work 24-7 for fascist psychopath for close to no pay.  Yep, that’s about the size of it.  They won’t even try to hide the fact–they write about how you should accept as little pay as possible.  In 2008 Peter Thiel went on record saying the best predictor of startup success is low CEO pay.  Really?  That’s the best predictor VC’s have come up with?  Thiel is not the only VC to suggest it, not even close, and they’re largely successful at getting what they want–75% of founders pay themselves less than $75,000 a year.

What about that business of “Messy death inevitable?”

I suppose it’s a function of how you define “Messy”, but the “death inevitable” part rings true.  VC’s these days want startups capable of reaching $1B in revenue.  The reason, as one explained to me over drinks, is that they make their exit when the startup IPO’s.  But in order to IPO at a reasonable valuation, they have to be able to paint a picture for those buying public shares that the company has years of growth left.  That’s how the Greater Fool theory works–you can never let people discover they’re the last ones and the valuation has peaked.  So what happens to $1B Unicorns?  First, by quantifying things at $1B, we learn that the Utility Curve for VC’s is drastically different than for most Founders.  Offer Most People $10M after 10 months of effort when they’ve never made even $1M, and an awful lot of them will say, “Yes.”  The VC’s will resoundingly say, “No,” and they’ll tell you that anyone who says “Yes” never should’ve raised VC in the first place.  BTW, I have been through that scenario personally and I can tell you it was a harrowing experience.

Getting back to that $1B Unicorn, the odds are not at all good.  Only about 0.07% of Consumer and Enterprise VC-Backed companies become those Unicorns.  That means, Dear Impressionable Young Founder, that your odds are one in 1428.  The odds of winning on a single number at roulette are nearly 40x better, and you don’t have to bet years of your life on the roulette number.  One in 1428 odds of achieving World Domination.

That Messy End will come about because of the inevitable terms in your legal documents with your financiers and because of how the system operates.  Consider if you had worked hard to achieve a modicum of success and sold a company for millions but none of the founders or employees got anything at all out of it except a job with the buyer while the VC’s saw a positive (but inadequate in their eyes) return.  Wouldn’t that be a messy end?  The key term in your documents that leads to tears is the “Liquidation Preference.”  Supposedly the market standard is 1X but I’ve seen numbers as high as 3X in some cases.  Now let’s suppose you’ve got a company that is sold for $50M.  That’s a lot of money: many would regard that as a successful company.  But, it’s only successful to the investors to the extent it generates a return on their investment.  Suppose they’ve put in $40M and have a 1X liquidation preference.  That means they get back their $40M right off the top.  Now there’s $10M left to split between the investors, founders, and other employees.  You’re probably diluted pretty good at this time, so let’s say non-Investors are getting $4M.  Suddenly your $50M sale is getting you more like $1M than the $5M you and your co-Founder expected.  It gets worse–with a 2X or 3X liquidation preference, you get nothing.

Make no mistake–the VC’s feel perfectly justified in all of this and see it as emminently fair.  Fred’s example from that link sure sounds fair, but as some of his commenters point out, it attaches no value to the sweat equity of the Founders and employees.  They may have worked years of their lives at sub-standard pay ($75,000 a year?) and not be entitled to a dime in a scenario where VC’s are getting all of their money back.

“NO Weirdos?”

Yes, the VC’s prefer to invest in the Old Boys Club.  Minorities and women will have a tough time breaking in, not that they are Weirdos in any sense, but the homogeneity of the VC Startup Club and especially of the VC’s themselves is strong.  You need to have gone to the right school and have the right background.

The VC’s BTW, are (mostly) not really Evil.  But they have certainly done everything in their power to create a set of rules that overwhelmingly favors their own success, even at the expense of Founders.  Looked at in the cold light of reason, it’s hard to argue it isn’t pretty much as the plackard about Evil Geniuses suggests, at least metaphorically.  Why then do Founders seek Venture Capital?

After talking to lots of Founders seeking advice (I’m on my 7th Startup, have founder 4 of the 7, and have had 3 happy liquidity events), I have concluded the primary motivator for Founders seeking VC is that they want to reduce their risk.  It’s ironic.  VC’s these days don’t accept Founders until they’ve forced the Founder to remove as much risk as possible.  You have to create a Product, find an Audience, and demonstrate Traction before they’ll put a dime in.  Or, you have to give away a surprising amount of your company for surprisingly little capital if you go the Incubator or Angel route.  Yet, these Founders are largely worried about two things they believe can reduce their risk.  First, they want knowledge.  They want people who have succeeded to tell them how to succeed.  Second, they want connections.  The Incubator promises to put them in touch with the VC’s when the time comes.  The VC’s promise more VC’s, talented executives, and many other contacts.  Founders want to be part of the Network.

Experienced Founders are less about the connections or knowledge, they’ve realized they can get connections and knowledge more easily in Silicon Valley than almost anywhere in the world.  Scratch the push for connections and knowledge up to inexperience on the part of young Founders.  Experienced Founders just want the VC’s check.  They want to get where they’re going faster and with the certainty that plenty of money in the bank promises to bring.  VC’s hate to be courted simply for a check.  It eliminates their view of how they differentiate their firm and belittles the possibility they will make a contribution from the Board.  Yet, even many VC’s share the view of many experienced Founders that aside from Cash, VC’s often add negative value.  No less a personality in the VC world than Vinod Khosla says 70 to 80% of VC’s add negative value.  If you look at the impact forcing a company to take unlimited risk in the quest to becoming a $1B Unicorn has, I would suggest that many companies that could have been successful by any non-VC standards and happily profitable got pushed too far and left behind a smoking crater when they fell short of joining the Unicorn Club.

One of my favorite bloggers is Seth Godin.  He writes about this odd conundrum perfectly in his short post, “How much does it cost you to avoid the feeling of risk?”  He’s talking about the risk of putting yourself out there, and it’s no different for Founders.  The VC’s are asking you to do most of the work of creating a successful company before they put any money in.  They’re asking you to do it on your dime.  Unless you have it thoroughly in your heart and soul that  you won’t be happy until you’ve created a Facebook or Google-sized success, forget the VC.  Finish the remainder of the work to create a profitable company instead of raising VC.  That’s the real essence of reducing your risk.

Turning your happy little company into a VC Startup is the first step on the ladder of radically increasing your risk because you’re committing yourself to swinging for the fence.  No bunts, no singles, doubles, or triples.  Swing for the fence, and if you miss, you’re a failure.  Make no mistake about it:

VC’s increase your  risk.

Posted in bootstrapping, business, strategy, venture | 2 Comments »

Everything You Need to Know About Email Marketing in One Tiny Little Post

Posted by Bob Warfield on December 13, 2013

seths.headTake the time to go read Seth Godin’s post about the 8 things you really need to know about email.  It’s short, totally to the point, and exactly the way my bootstrap business CNCCookbook tries to pursue email.  It has worked great for us and I get tons of love letters back as a result.

If you have all of Seth’s bases covered, you will too.  As I mentioned recently, we use Mailchimp (sounds like he does too) to automate as much of the email process as possible.  Interestingly, I have not heard a word from them about my post on their becoming less user friendly over time.  That’s got to be a first.  OTOH, as Seth points out, they’re just a tool and not really the important part of the equation.

 

Posted in bootstrapping, business, Marketing | Leave a Comment »

Why Pay for Mediocre Marketing Advice When Good Advice is Free?

Posted by Bob Warfield on November 22, 2013

snake-oilOkay, it’s time for somebody to call BS on a practice I’ve seen for a long time.  This will probably get me some negative press, but it needs doing.  The practice I’m tired of goes something like this:

-  Entrepreneur starts up a bootstrapped business.  Enjoys modest success and quits Day Job.

-  Suddenly, they are the World’s Foremost Expert on Marketing, and they want to sell that expertise.

-  Often the expertise costs more than the product that let them quit their Day Job and often they make more on the marketing advice than on their “real” business.

I see this happen countless times, and it just strikes me as wrong.  Sure you made a few bucks with that obscure product that teachers love.  Sure you’re on a jihad against unicorns or who knows what.  Sure you quit your Day Job.  But are you really that big a deal that people should be beating down your doors to buy your marketing advice?  Well maybe.  Perhaps you even say you’re kind of a big deal, and in that particular case, you probably are.  But a lot of these folks just haven’t enjoyed that much success.

Ask some basic questions:

1.  What was their signature success that qualifies them to be your marketing mentor?

2.  How big was that success really?  How does that compare with what you hope to achieve?

3.  How many times have they succeeded like that?  Silicon Valley is filled with one trick ponies.

4.  Did they succeed only in frothy bubbly times, or do they have some success when times were tough?

5.  Did they product a big liquidity event or earn a great income year after year?

6.  If their core business is so great, how come they have time to be selling marketing advice?  Why are they selling marketing advice?

7.  If this advice is so special, are the other marketing luminaries quoting them?  Are they even part of that set?  Or are they just being quoted by their customers?  You know, the people that buy these things because they don’t know?

Young Entrepreneurs are vulnerable.  They’d have to be to give up a big chunk of their company for very little cash just so they can be part of an incubator they can learn from.  That’s another one of these deals that’s in the same category for me–you’re paying a lot for some advice that seems mediocre relative to what you can get absolutely for free.  Yeah sure, maybe you’ll make contacts that matter.  Guess what?  It’s not that hard to make contacts and there are cheaper ways to network.  Most successful people are surprisingly generous with their time and advice if you approach it right.

OTOH, maybe this incubator thing is just something you do so somebody will hang a credential on you that dispells some of your insecurity. You think that credential is so others will respect you, but mostly people respect success, not the promise of success.  A lot of this stuff is just getting in the way of getting on with it.  There is no group you can join, no person you can talk to, no degree you can get that will guarantee success.  It’s all up to you, and one of the first things you have to learn is how to sift through all the inputs and get what you really need while ignoring the rest.

I just hate to see people being taken advantage of out of ignorance or insecurity.  I’ve done 7 startups now, founded 4 of the 7, had 3 successful Big Exits (2 acquisitions and an IPO), 3 failures, and 1 very happily still going company.  That’s a pretty reliable track record where small business is concerned.  You don’t get that many hits accidentally.  I did my first run straight out of college in Houston, Texas at the tender age of 23 where there weren’t any incubators or anyone to ask for advice.  Most people thought I was weird or nuts for trying to start a software company instead of getting a real job.

When I was first getting my current bootstrapped company, CNCCookbook, going, I bought a bunch of those marketing products I’m railing against.  6 or 7 of them.  Each one was $75 to $300.  There was LOTs of information there to read.  Lots of formulas for success.  I was hungry to find the knowledge that had to be valuable because it wasn’t available for free.  I had everything from how to get 10 zillion followers on Facebook overnight to the you-betcha-sure-thing Guide to SEO.  But a funny thing happened.  Not one single one of those expensive products taught me anything I hadn’t already learned for free–not one of them!

We live in the age of Content Marketing, Inbound Marketing, or whatever you want to call it.  Many people are giving away extremely high quality information for free, just to get your attention, so they can sell you a real product or service.  You don’t need to pay a bunch of money for Joe-Average-Entrepreneur’s-Startup-Secrets-Snake-Oil-Course.  Real success stories are dying to tell you everything they know.

How can they do that?

It’s a time honored tradition in modern marketing.  So long as they have something else to sell, they give away valuable content free to earn your trust, interest, and attention.  I’ve used this method to build my CNCCookbook web site up to 2 million visitors a year–huge for the CNC Machining niche market.  It’s not that hard to do, but it takes some time, it takes some determination, some love for the subject matter, and the ability to write.  Personally, I think establishing contact with an audience via your content is a critical first step every startup needs to take–even before they have anything to sell.  I didn’t invent this idea–really talented marketing people did, and they’re out there today desperately trying to give away their best ideas to you!

Where’s the good free stuff?  Metaphorically, it is falling from the Internet sky on marketing blogs everywhere.  Seek out the most successful marketing software companies.  You know, the ones that really get content marketing.  There is a vast amount of great information pouring forth from their blogs.  You can even get materials a lot like the “marketing courses” these other guys sell by signing up for a white paper–no charge, they just want you to fill out a contact form.  You gotta believe marketing people who can successfully sell marketing software to other marketing people might just know a little something about marketing!

Here’s my short list of great blogs from marketing software companies:

KISSmetrics

Unbounce

I love split testing

MailChimp

ManageWP

SEOMoz Daily

Buffer Blog

Totango Blog

WordPress.com Blog

ComScore Voices

Get Elastic

Next, find companies selling marketing services such as SEO or other services.  Or they may be marketers that don’t sell anything to other marketers, but they’re just driven to write.  I guess I consider myself in that category.  I love to share information and ideas.  Again, there’s a ton of them with great blogs:

Analytics Talk

Chris Brown’s Branding and Marketing

Convince and Convert

Digital Marketing Blog

Futuristic Play by Andrew Chen

Heidi Cohen

Seth Godin

Quick Sprout (He’s Kind of a Big Deal)

IdeaLaunch

Jeff Bulla’s Blog

Marketing Tech Blog

Marketing Experiments Blog

SaaS Growth Strategies

Spatially Relevant

These people know each other.  They quote each other.  They respect each other.  If you want to learn from an expert, see who the other experts listen to.

Entrepreneur Resources abound too.  Get the word from fellow entrepreneurs and VC’s, but don’t pay for it.  You’ve got Hacker News full of from the horse’s mouth information by entrepreneurs and for entrepreneurs.  You’ve got more and more VC’s going on line to tell you what they think.  You’ve got tons of bootstrappers from 37Signals to SmugMug on down to guys like me, all telling you what they think and how they did it.  And they’re telling you all of that for free, or in some cases for the modest price of a cheap book like 37Signals or Seth Godin.

Stick all of those feeds into your RSS reader, then go find more.  Click through the links in the articles from these blogs–they lead to other rich sources of information.  Fill it up until you’ve always got a few hundred unread articles.  But try very hard to at least scan everything until you’ve got a good feel for what you’re missing if you don’t read.  While you’re scanning, start a ToDo list.  These are ideas from the articles you want to try and topics you need to research more fully.

Too much to read?  What’s the matter, you don’t have time to actually learn what it takes to be successful?  You need to be like a sponge early on, and none of those wanna-be-pay-me-for-my-sure-thing-courses are going to make that any easier than just reading this stuff that’s available for free.  In fact, they’ll make it worse.  They will also bury you in content, then they’ll send you endless emails trying to sell you even more content.  The difference is you are paying them your cash before you even know what you’re really getting.  Plus, you’re reading from one or a few sources and you don’t get to see what correlates and corroborates and resonates across many sources.  These guys I’m pushing above are giving it away for free and you can scan it and delete it if it isn’t of interest.  You’ll get the Gestalt view of it.  You’ll get a gut feel for how it all fits together.

What could be a more valuable way to invest your time?

Still not enough time?  You can add my own clippings blog, Firehose Press, to your RSS Reader.  Those are articles I culled from the Firehose–I subscribe to about 200 blogs–on marketing.  Articles that were good or that moved me to add something to my own personal ToDo list.  It gets updated less and less frequently because once I’ve learned the lesson, I don’t bookmark the same lesson over and over again.

Once you reach the stage where your ToDo list is getting long and you are skimming and deleting more than you’re seriously reading, you’ve lifted the plane off the runway.  Hopefully you’re reaching and audience and your next challenge is to get better at it.  You’ve now got an RSS Feed that’s filled with new ideas for your hopper every single day.  New A/B tests to try.  New tactics and strategies.  New ideas for content.

Good for you.  Instead of buying fish, you’ve now learned how to fish.  Go forth and be prosperous.  But don’t package up what you learned into some cheezy course or seminar.  You got there standing on the shoulders of others.  Help the next guy–reach down, grab their hand, and boost them up.

Posted in bootstrapping, business, strategy | 5 Comments »

Jump Starting a Small Business With Cloud Services

Posted by Bob Warfield on November 18, 2013

PennyPincherSo you want to start a small business, perhaps a bootstrapped tech company?  Good for you, I enjoy mine immensely.  Let me suggest you adopt a rule that I’ve used for a long time:

If it’s available in the Cloud, use the Cloud Service.  Don’t roll your own or manage your own server, even if it is a server in the Cloud.

The thing about a good Cloud Provider (or SaaS service, if you prefer), is that their service is their business.  If they’re doing it right, they can afford to know a lot more about it, do the job a lot better, and deliver it a lot more cheaply than you can.  Meanwhile, you have plenty of work to occupy your time.  Keep your focus on doing those things that uniquely differentiate your business and delegate the rest to the Cloud whenever you can.

That’s the high-level mindset.  Using this approach I have consistently taken companies that had significant IT burdens and gotten them down to where it takes a talented IT guy maybe 1/3 of their time to keep things humming along smoothly.  This for sites that have millions of visitors a year–plenty for most small businesses.  BTW, my instructions to the IT guy were to spend that 1/3 of time automating themselves out of a job.  They’ll never get there, of course, but all progress in that direction is helpful.

Why So Much Cloud Emphasis?

Let’s drill down on why I think that’s the way for small businesses to go.

First, there’s no need to deal with hardware and so that whole time-consuming effort of ordering the servers and setting them up is eliminated. You can turn cloud-based services on or off in seconds.

Second, the cloud-based services know how to manage their services because that’s all they do.  Suppose you choose to base your web presence on WordPress. You could deal with setting up the WP server on an Amazon instance and still be in the Cloud, but now you have to manage it (keep all the security updates going, run backups, optimize for speed, etc.). That takes time and expertise.

Or, you can let a service like Page.ly, ManageWP, or WordPress.com do all that heavy lifting for you.  Now you don’t even have to think about it much—it just happens and they follow industry best practices it would be hard for a small business to emulate.

Third, you can scale up and scale down. Small business traffic is very bursty. One day some big site like Techcrunch writes about you and your site is melting down—nobody can access it. You needed to scale up fast! The next day you’re back to your normal small business traffic. If you had invested the time and money in big scale, it’s wasted on those days laying idle. But, if you choose the right cloud-based host they can scale up and scale down automatically for you.

BTW, this is critical for good Google results as they penalize slow sites on SEO.

Okay, How Can My Business Use the Cloud to Best Effect?

I’ll cover this one by what I see as the critical business phases:

1. Reach your audience

Job #1 has got to be creating a web presence that lets you reach your audience. You need to do this even before you have a product to sell them, because you’ll need to take advantage of the time you spend building product to optimize that audience touch point. Towards that end, you’ll want the following:

-  Web Site with Blog: I highly recommend building that around WordPress using a WordPress Cloud Hosting service. It lets you leverage the huge WordPress ecosystem which means lots of off-the-shelf plugins and know how to make your web site sing with minimal effort on your part.

-  Analytics and A/B Testing: Get hooked up with Google Analytics via a plugin for WordPress so you can monitor what people do on your site and use that feedback to improve your Audience attraction and engagement. A/B Testing lets you try pages side by side to see which one works best. It takes time to optimize, so don’t wait until you’re ready with product. Start day one trying things to see what works.

-  Social Media: Get your Facebook, Twitter, and LinkedIn pages going ASAP. If nothing else, you need to nail down your presence and brand in those places. Use WordPress plugins to automate the interconnection of Social Media with your web site.

-  Domain: Don’t bother picking a company name until you nail your custom web domain. Read up on SEO aspects of that to make sure the domain is helping you pull traffic. Get yourself a DNS service such as DNSMadeEasy or one that Amazon provides. This will let you tie together disparate Cloud Based services under your brand and domain.  The DNS decides what computers actually get the message when someone types in a URL.  It’s like the central switchboard of your web presence and you’ll use it for all sorts of things.  It’s also your lifeline if some emergency strikes a Cloud provider and you need to bypass them to get to an alternate of some kind.

-  Email: Gear up both your firm’s employee email plus an email service you can use to email customers.  Start building your mailing list day one so you have as big a list as possible available to help when you’re ready to launch. I like services like MailChimp for the mass mailings and services like Google Apps for employee email. Be sure your email service includes easy integration to your WordPress blog and start a weekly email newsletter from day 1.

-  SEO: Learn to master your own SEO activities. It affects every aspect of your web presence. You have two audiences—people and the machines that are performing search at places like Google or Bing. You can’t afford to fail either audience. There are a variety of Cloud Services that can help you with this such

-  Surveys: You need all the feedback you can get to guide your efforts to reach your audience. I like SurveyMonkey and Qualaroo.  Survey Monkey does complex surveys.  Qualaroo does neat little spur of the moment unobtrusive surveys.  Both are extremely useful.  I use Survey Monkey for targeted surveys that go out via email and blog posts.  You get a survey when your free trial ends.  I use them to research market topics.  They’re great for creating interesting content–people love to read survey results.  Qualaroo is on key web pages asking:

“Would you recommend this product?”  on the download page

“What articles should we be writing?”  on the blog

“What can we do to make this product more likely something you could buy and use?”  on the pricing page and elsewhere.

-  Customer Service:  Customer Service isn’t just about fixing product problems.  It’s about giving your audience a way to reach you and a way to reach each other to engage.  As such, it’s worth setting these systems up from Day 1.  For my businesses, I want a Customer Service solution that offers a pretty big menu:

Trouble Ticketing.  This is the classic Customer Service app but it’s the one you’ll use the least often if you’re doing it right.  Consider Trouble Tickets to be a failure.  A failure to prevent the problem before it started.  A failure in documentation or user interface/experience.  A failure to communicate.  The customer’s point of last resort.  You have to have Trouble Ticketing, but you want to do everything in your power to make sure Customers never have to use it.

Idea Storming:  I love giving customers every possible way to provide feedback.  Ideation is the ability to put an idea on an idea board and vote on it.  Give customers a fixed scarce number of votes and then pay attention.  Whatever rises to the top on the voting is something you need to deal with.

Forums:  Own your own forums even though there are lots of forums out there.  Make them private and require some form of sign up.  This is your exclusive User Club.  Be very responsive on the forums.  Go there first and Trouble Tickets second.  If you help someone with a problem on the forums, others can see the answer and potentially be helped in the future.  If you help someone by closing a Trouble Ticket, you only helped them and the effort is not leveraged.

Knowledge Base:  You want a KB integrated with the rest of the Customer Service experience so that as someone enters a Trouble Ticket, they are directed to KB articles that can potentially help.

I use a service called User Voice to do all those things except the forums.  I use a free BBS service for that.

2. Build your product

If you’ve got a software company, or perhaps an e-commerce company, you’ve got to build some software.  There are helpful Cloud services here too:

-  Source Control: You need source control day one.  Being without it is like jumping out of an airplane without a parachute.  I like Github but there are lots of others.

-  Bug Tracking: For bug tracking and the like, Atlassian and others have this base covered. Don’t confuse it with Customer Service software, which I will cover under E-Commerce.

-  Online information resources: There are so many here I can’t begin to count, but we live in an age where there are literally thousands of developers helping each other online in all kinds of ways.  StackExchange can answer almost any technical question you might have. Online forums are there too for more specific areas.

-  Consulting: Need quick design work but don’t have a designer on staff yet? Need a specialized piece of code written that’s just part of your solution but nobody knows how? Need a little extra testing help or maybe some tech writing? There are tons of services like Elance that can get you some high quality temporary help.

3. E-Commerce

For this stage, you have a vibrant audience, big and growing email list, and your product has had a successful free Beta test. Time to start charging. Here are some things you may need to take the order, process payments, and handle the accounting:

-  Shopping Cart: If you chose WordPress, there are tons of plugins to help. But, they’re not the only game in town either.

-  Payment Processing: Who will process credit cards for you? Lots of possibilities ranging from Paypal to Stripe.  Be sure your processor covers International sales and any special needs you may have, like recurring payments for subscription services.

-  Accounting: A lot of these services can connect to QuickBooks to make your bookkeeping easier.  Scope that out in advance.

How Do I Choose the Right Service?

With so many different kinds of Cloud Service, it is hard to be specific. So, I’ll talk about the generic:

- Look for an online and vocal fan club for the service. It doesn’t take long with Google to see which services are loved and which ones are marginal.

- Look for companies similar to yours that use the service proving someone else has tried it and succeeded. Try to contact those companies and see what they think of the service. I’m not talking competitors—they won’t help. But there are always similar kinds of companies that don’t compete at all.

- Make sure you have a roadmap for what you need your services to be able to do for at least the next 2 years. Get your developers and others to review the proposed service against the roadmap and make sure you won’t have to switch down the road. It’s a good exercise to have that Roadmap available anyway—it’s just a wish list of everything you want to do for Marketing, E-Commerce, and Product over the next 2 years.

- Get your developers to look carefully at the published API’s for the services. Even if you won’t be using any API’s early, someday you might. The quality of the API’s is an indication of how well architected the service is too.

Conclusion

You can build a pretty amazing online Customer Experience if you make full use of available Cloud Services as described.  If you have build all of it, set up the servers, do the backups, install all the updates, and so on, you’ll be wasting a lot of your time that could be spent doing other things.

Posted in bootstrapping, business, cloud | Leave a Comment »

The Trend to Part-Timers, Freelancing, and Consultants Over Full-Time Employees

Posted by Bob Warfield on August 8, 2013

FreelancerOffshoring, Outsourcing, the switch to freelancers instead of full-time employees, and all of the other ways big business wants to shed expenses at no apparent cost is a trend that’s well underway.

Shortcuts all have a price of one kind or another. Usually that price is hidden from the bean counters that wanted to do these things for short term profit bumps regardless of the impact on quality, visibility into what was being done on behalf of a company, actually creating value that belongs to a company and is reproducible, making sure that talent is loyal and believes in the company and its goals, and so on.

As for freelancing, when you force someone to stand on their own two feet, when they have to learn to fish for themselves, suddenly, they get a much clearer picture of their real value to the organization and of the organization’s value to them. Successful freelancers are some of the hardest people to recruit on the planet because they know the organization doesn’t bring them much value while they are creating a great deal of the real value.  That’s why you have to pay consultants more.

If you find yourself having to go it alone, it will start out very scary.  You’re going to have to stretch to learn to wear more hats.  You have to learn to market yourself, for example, and to network to find business.  Cast off your fears and welcome those challenges.  Quit trying to join a large organization or get Big VC to back your idea.  You can go it alone more than well enough to come out way ahead.  After all, business wouldn’t be doing this to you unless they didn’t value you all that much.  That tells you something about how they will treat you if they did decide to hire you.  OTOH, you are also undervaluing yourself.

Why make the same mistake as the business whose decision you so disagree with?  Recognize your inestimable value and get to work for yourself.  Enjoy being your own boss.  Embrace the change and use it to improve your life.

Posted in bootstrapping, business, strategy | Leave a Comment »

Too Many Would-Be Entrepreneurs Are Thinking About Their Ideas, Companies, and Investors All Wrong

Posted by Bob Warfield on April 19, 2013

snake-oilAs so often happens, the serendipitous intersection of one too many notes from the same chord in a short time have prompted me to post.  In this case, I am seeing a lot of evidence that would-be entrepreneurs just don’t think about their ideas, their companies, or investors as they should.

Case in point: I recently had dinner with a friend to do some catching up.  He explained that another mutual acquaintance had an absolutely brilliant idea for a startup.  My friend really wanted to be a part of it, and he confided that they were thinking of going the Y-Combinator route.  I’m sure it’s annoying to my pals (especially the ones who are themselves Angel or professional VC investors), but any conversation that focuses more on the investors than the idea and business models immediately launches me down a set path that the recipient often finds a little bewildering if not downright antagonistic.  Despite all that, I asked my friend why he wanted to go with Y-Combinator?  Why get any invested capital at all?

He spent quite a while, too long really so it only lit my fire brighter, talking about the $30,000 they would receive in exchange for 15% of the company.  I asked him to explain what the $30,000 would allow him to do that he couldn’t otherwise accomplish on his own.  After all, $30,000 is really not very much money.  This goes to the heart of one way Entrepreneurs don’t think right about their plans.  If $30,000 seems like a lot of money to you, if it seems like an enabler of some kind, it’s my belief you’re using it to solve the wrong problems, and that in fact, they aren’t real problems to start.  You’re thinking of using it to quit your Day Job, to hire others, or to pay for advertising.  You don’t need to do any of that, as it turns out.

Let me explain–I’m a firm believer in Bootstrapping ala 37Signals.  Their formula is pretty simple–you can build a company on 10 hours a week while you keep your day job.  David HH wrote a great post on this not too long ago entitled “All or Something “.  The gist is that you don’t need to adopt an all-consuming commitment to get something interesting done.  The intro to his article is worth reading carefully:

One of the most pervasive myths of startup life is that it has to be all consuming. That unless you can give your business all your thoughts and hours, you don’t deserve success. You are unworthy of the startup call.

This myth neatly identifies those fit for mission: Young, without obligations, and few if any extra-curricular interests. The perfect cannon fodder for 10:1 VC long shots.

They’re also easier to rile up with tales of milk and honey at the end of the rainbow, or the modern equivalents, “compressing your working life into a few years” and “billon dollar waves”.

But running your life in perpetual crunch mode until the buy-out or bullshit-IPO fairy stops by your door is not surprisingly unappealing to lots of people.

In fact, what you do might even be better and more successful if you take your time by only working 10 hours a week on the idea.  I’ve seen this for myself with my CNCCookbook bootstrap.  The problem is you think you know exactly the right thing to build and if you could only get it done, riches would be yours overnight.  The reality is that nobody knows exactly the right thing to build in a vacuum.  You benefit by interacting with the market, and it takes time for the market’s message to come back to you and be properly infused in what you’re building.  You can’t infuse it at a 100 hour a week pace because it simply doesn’t come to you fast enough.  It requires a feedback loop and a little more gradual change.  This applies not just to the product itself, but to achieving a content-audience fit and then growing that audience to an interesting stage.  If you think otherwise, then you’re not being realistic.  You’re looking for that long-shot of completely unbridled demand that will seize your company and carry it in the vortex to the Land of Oz.  You’re looking for that 10:1 VC long shot.  Unfortunately, you don’t have a portfolio so that the 10 that didn’t work before the 1 that did doesn’t sink you.

Here’s the other issue–if you can’t overcome the kinds of problems $30,000 will solve without the $30K, you may not have the right idea or you may not have the right team for the idea.  Creating a successful multi-million dollar company is a big accomplishment.  If all it took was $30K, a little advice, and some networking, there’d be a lot more people with their own multi-million dollar companies.  There’s a set of skills your team must have.  There’s a set of qualities your idea and market must have.  Without them, $30,000 won’t begin to fix the shortfall.  $30K is just a convenience, not a solution.  It’s not even aspirin, it’s a vitamin pill.

So $30,000 is actually not really very useful to someone that is focused on the 10 hour a week plan.  Certainly it isn’t worth giving up say 15% of your company and potentially a lot more than that in terms of control and heartache that will still be there long after the $30,000 has been spent.  To his credit, my friend did get off the $30K after a little while and suggest that having all that networking and mentoring would be worthwhile.  That’s actually something I see as being much more valuable, but in truth, it actually isn’t all that hard to come by in Silicon Valley.  After all, the networking is one reason why we put up with so much cost to live here, isn’t it?  If you think you need an incubator to be mentored, to ask questions, and to learn how to do it, ask yourself how that’s any different than signing up for a bunch of the Anthony Robbins-style self-help seminars?  You know the kind–some flashy personality is telling you they have all the answers and they’re willing to share them so that you too can be a multi-bazzillionaire loved by everyone.  All for a price.  Guess what, this works for some people, but for most, they could’ve had the same answers without much effort.  I told my friend I’d be happy to help him understand how to launch and build a business having founded 4 software companies and been involved in 7 software startups.  I also told him the cautionary tale of those making their livings off such advice.

Hacker News is a good place to find such people, and I’m not picking on HN for it, that’s just where the paying customers are for these peddlers.  I call them the Entrepreneur’s Self-Help Gurus.  Don’t get me wrong–there are some dynamite folks out there who can and will help you, but I’m referring to a different sort of group.  These are folks who did something that if examined closely, was not an especially big deal.  Yet now they’re making more than they ever did on the not-especially-big-deal telling other people how they did it.  “I’ve got the secrets, and I’ll share them for just a small fee.”  Perhaps they created a software company in an odd little niche, never cleared more than $100K with it, but now they’re making $200K and more telling others how to do it.  To me, there is something wrong with that picture.  Just for kicks, I signed up for a bunch of the more popular pay-for-content mailing lists.  You can get them on sale all the time from AppSumo, for example.  After going through about four of them promising everything from SEO expertise to how to get 10,000 Facebook followers, I finally quit.  I hadn’t managed to learn a single useful thing from them.  In fairness, if I had been at the very beginning of my journey, they might have helped a little, but everything they had to say that was useful was available for free on some blog somewhere on the Internet that I had already read.  FWIW, I keep a clipping blog of such information I call Firehose Press.

I finally realized, that what these people were selling, was not the information, but the confidence to use the information.  That’s not something I really needed, and I hate to be a wet blanket, but if that’s what you need, are you sure you’re ready to be an entrepreneur?

One more thing on the subject of networking–you can go have coffee with so many extremely talented and successful people in Silicon Valley at the drop of a hat that it’s ridiculous.  People here are incredibly generous with their time.  Heck, if Y-Combinator fascinates you, go look up the Alumni and go ask them what they learned there and what they got out of it.  You just need to find a friend of a friend to introduce you and most decent people will share a cuppa joe with you.  Why not?  I often do.

Okay, so maybe the networking mentoring isn’t the thing.  What about all those juicy introductions to VC’s?  I have several problems with this one too, being the VC Curmudgeon and all.  It isn’t that I haven’t dealt with the VC’s.  In fact, they’ve been involved with every company I’ve been with until this latest one.  Let’s start with the intro process.  It’s not hard.  You need a CEO who they would want to talk to and an intro from someone they know.  If you have such a CEO, they can get that VC intro from someone they know.  VC’s actually want to meet people, they just want to meet people who won’t waste their time.  Same with Angels only it’s even easier to meet one of them and you might not need that CEO quite yet (but you will, so may as well find them so they can help you from going too far astray).  You don’t need Y-Combinator to meet these people.  What you need to meet a VC is pretty simple:

-  A product finished enough to be sold.

-  Real paying customers who will say extraordinary things about your product.

-  Traction.  The amount varies with the space, but there needs to be evidence that pouring gasoline on the fire will make it bigger in a hurry.

Too many entrepreneurs think investors want to give them cash to make some or all of those three things happen.  I won’t say it can’t work that way, but it works less and less that way every day in the Valley.  Y-Combinator, for example, used to invest more than $30K.  Most of the VC startups I’ve done raised a couple million dollars on a slide show and a team.  Those days are long gone.  You’re going to have to bootstrap to a greater or lesser degree (and mostly greater) anyway, so you may as well get started learning how to do it, even on 10 hours a week.  In fact it’ll be better if you limit yourself to 10 hours a week–it will teach you to focus.  The realization that I had to bootstrap to raise VC is what set me on the bootstrapping path, by the way.

Too many entrepreneurs think they need something to be able to be entrepreneurs.  They need money, advice, connections, confidence, permission, or at the very least, a guru they pay to tell them how it’s done.  But here is the amazing thing: you don’t need any of those things.  You can do everything that needs to be done in 10 hours a week to build a very successful multi-million dollar a year company.  Do that first, ahead of worrying about investors, and you will be 10x better off.  Because, here’s the thing, if that company explodes with a growth rate beyond your wildest dreams and you need a lot of capital right now just to keep the site up and running, that’s not a crazy home run extraordinary case for the VC’s.  That’s what they expect to see.  That’s what they’re looking for to get their checkbooks out.  That’s table stakes and we’ll see where it goes from there, whether you can monetize it, whether you’re the right ones to run it, and whether it is a passing fad.  If you have a deal at that stage, congratulations.  You’ll have to beat the VC’s off with a stick, and you’ll be able to dictate your terms.

But what if you don’t have one of those?

Don’t despair.  Remember:  an Enterprise Software Company that puts together a steady-but-not-sexy business and manages to get to $100M in revenue and an IPO is often seen as a failure in VC portolios.  They want the $1 Billion deals.  But you?  Heck, you’d be thrilled to be the 100% owner of a $15 million dollar a year software business with 20 employees that was throwing off cash like crazy and whose customers loved you.  That is unless you are that rare Zuck/Gates/Ellison/Brin type that really does care more for power than money or lifestyle, of course.

One last reference to recent influences that spurred this post.  I saw Jake Lodwick’s post in Pando Daily, “An Acquisition is Always a Failure.”  I understand exactly where this guy is coming from having had 2 of the companies I founded acquired.  Surpass was acquired by Borland and that was the Quattro Pro product and Integrity QA was acquired by Pure Atria.  Surpass was a great acquisition.  I joined Borland, we sold over $100M of Quattro Pro the first year, I moved up through the ranks to eventually run R&D for Borland in its heyday, and it was a fabulous company to be a part of.  I learned a lot.  Pure Atria was a great company too, but it didn’t last.  Six months after I got there it was gobbled up by Rational.  They already had a product with a brand that competed with Integrity QA’s product and it was based in Boston, not Silicon Valley.  Despite Integrity’s product being one of the most innovative things I have ever worked on (Genetic Algorithm-Based Software Testing), it basically never went anywhere because politically, it was stuck in a closet where there was no light.  It exists today as an IBM product called TestFactory, but it’s growth was stunted and it never recovered.

It’s fascinating to read the comments in Lodwick’s article and contrast them with where Jake is coming from.  He says:

Whereas we’d once been free to work on whatever seemed interesting, we now found ourselves in vaguely defined middle-management roles, sitting through pointless meetings where older doofuses who didn’t understand the Web challenged our intuitions and trivialized our ambitions.

That was basically my experience working for Oracle, where I learned a lot, but couldn’t accomplish much.  Similar with Rational.  Big Companies do work much differently than smaller ones, or as Jake says:

They’re another class of entity entirely, more concerned with sustaining their own rhythms and control structures than experimenting with strange ideas from acquired ex-founders. It wasn’t long before I was ejected like a virus.

Then he describes the frustration of being loose with money, but without company all founders who get acquired feel:

With a fat bank account, I was pretty set to do whatever I wanted for a long time. The sale afforded me the ability to make art, invest in other companies, and unwind. But it didn’t take long to realize that my new life was a hell of a lot less exciting than running an independent company had been.

So true.  Then we have the commenters, and as I read through them, it’s hard to see them as being focused on much but the money, whether this is an indictment of what they need to do (investors need an exit/cash out), or whether there aren’t a few examples where an acquisition made a thing far greater than it otherwise would have been (Android).  Most of them missed Jake’s message and wisdom entirely.

Here’s the thing.  At one point Jake talks about getting $50,000 checks each month.  Do the math carefully before you decide you need a VC-scale company to make enough money.  I went through one of those VC-backed Enterprise Software IPO’s, and while I made good money, it was #3 on my hit parade of exits.  Owning a business 100% that plops $50K checks on my desk each month would’ve been a much better deal, and this is to say nothing of all the deals that crash and burn because the VC was driving for a 10:1 Long Shot.  You have to live through a lot of Ramen noodles on the long shots, then maybe you’ll see that big payoff.  Or maybe you’ll have been diluted out of your mind and it won’t be such a big deal.  I’d have been much better off owning that $50K/month business that I could keep on running that doing the IPO I did.

In the end of the Day, as an Entrepreneur, you need to get crystal clear about a few things:

-  How much money do you need to get from your venture?  If $1M a year is a happy number, the chance is a bootstrap is much less risky than a VC deal.  Remember, income equates to investment portfolio about 20X.  That $1M a year income stream requires a $20M liquidity event after taxes before you can live like that without working.

-  How much control do you have to have?  Hey forget whether you’re an ego maniac.  I’m talking of control more akin to artistic control.  The control to deliver on what you do well.  On why everyone always says they love you, but that Boards, CEO’s, and Professional Managers are only too quick to override if it suits their agenda.  If that artistic control to do what you do best is important, adding people who own significant parts of your company can only dilute that control and maybe even result in your being “ejected like a virus.”  OTOH, if you want Bill Gates or Steve Jobs-style control over an industry, you’re gonna need VC’s.  If you want to change the world with Electric Cars and Private Spacecraft like Elon Musk, you’re gonna need VC’s.  Just be really honest with yourself about what you need versus what might be nice to have.

-  Most importantly, how will your venture change your life?  What does it have to accomplish to make you happy?

Too many entrepreneurs get signed up for the promise of (to quote David HH’s article), “compressing your working life into a few years.”  Sounds great, but it better be just a few years to put up with the amount of BS that kind of pressure cooker entails.  And the truth is, it is never just a few years.  It’ll be 10 long years to reach the conclusion, assuming it is a happy one.

Why not start out with a venture that makes you happy every single day you pursue it?  If it has VC potential, you’ll know soon enough and you can decide then what path to take.  If it doesn’t have VC potential, you may still wind up realizing everything you’d hoped for and more.  Even better, it may be at much lower risk.

 

Posted in bootstrapping, business, strategy, venture | 6 Comments »

 
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