1) Pick an industry
2) Ask someone in that industry what they use spreadsheets for
3) Build something better
There is a lot of 'cybernetic' processes that are a mix of humans with domain knowledge and machines with spreadsheets for schemaless storage and querying. Generally the move is to encode the domain knowledge into code and standardize the storage (i.e excel -> RDMS) to make it more useful.
I know a guy that has made quite a successful software business out of abandonware. Find some business that's using software that has been abandoned. Original authors went out of business, etc. Maybe the users are still keeping MS-DOS or Windows NT computers around because it won't run on anything newer. This is not as uncommon as you might think.
Talk to the users, try to find out how many others are also using it. Rewrite it in modern technology, sell it back to all the current users (and ideally, also sell to others in the same line of business who might need it).
On top of that consulting opens door, you get very valuable insight inside certain industries and get paid for it.
Also, I'm sure I'm not the only one who is not interested in the slightest in building a unicorn or dealing with investors/VCs.
Building software with no clients requires capital, I'd rather keep mine for my family rather than burn it in the wind into something that is most likely to fail.
I think it's possible find a useful middle-ground between consulting and product building, in the pg "do things that don't scale" sense. As the article also points out you can kill a second bird with the same stone, which is self-funding via the consulting.
And then ideally via the consulting you find a niche(s), build your own processes & tooling for your niche to deliver value to clients, and then can product-ize once you actually understand the space and the market, who the customers will be and how to reach them, because you're already doing it via the consulting and just need to scale up.
It also serves as a sanity check that you're actually building something that has value, because you prove it to yourself via invoices for your work rather than investment in an idea.
I've heard this before, but part of the appeal of the spreadsheet is that Patty from accounting or Joe from HR can modify it without having to ask any IT staff, including you.
So I don't think it's a foolproof scheme, unless your solution is also programmable/customizable, which is a lot of work.
- "We can make a decent salary out of this" - 36 months - 48 months
I started and 10 years later made a successfully exit from my company, we never raised any money, the above figure is what it took us to go from financing our development our self (by having two jobs), to having enough customers to break even.
I think everyone should, bootstrap one company to get a feel for how it is, will make you a better entrepreneur.
Exactly the same setup as you, although I've not sold my company as I'm a happy owner (https://www.atlascode.com).
I launched Atlas in 2007, just one year prior to the economic crisis that followed. Nothing ensures that you keep an eye on every bill that is paid and focus ruthlessly on efficiency gains more than a global financial catastrophe. Getting through that taught me I was capable of running an already tough business under pretty much any circumstances, and gave me an incredible confidence boost.
Not that I'd recommend it, definitely some of the toughest years of my working career.
There is a bit of detail missing that I would like to understand. How to just 'talk' and give help? Do you approach people/businesses and ask if they are having any problems? Or, your aim is to just get the conversation ball rolling, hoping that it leads to the problem part without deliberation?
Strike up a conversation with anyone, casually mention you work with computers and they will tell you every problem they have from their horrible cellphone reception to the idiot IT guy at work to issues with Excel. Whatever the current 'computer' problem is, your'e about to hear it.
That's step 1. Step 2 is give them some solid advice in the form of a few things to try. Say "Well here's what I would do" and tell them what you'd do. If they keep asking questions, tell them something along the lines of "I did something like that for another guy and charged him $X/hour, you want me to stop by?"
Mentioning an hourly rate lets them know that even though this might be a hobby for them, its not a hobby for you. It also weeds out the tire kickers.
While I can't speak for OP, I've taken a similar approach with my own business. For me, the most important thing was to simply change my mindset from thinking "how can this person I just met help me (give me leads/business/etc)?" to: "how can I help this person I just met?" And that's going to be completely dependent on context. Maybe they need some help with a meetup, maybe they need some help with their iPhone, maybe they need some help with something completely non-tech related, and maybe they don't need help with anything at the moment. The point is: people like to help people who have helped them in the past. No one likes someone who appears selfish. Basically, just be a good friend to the people you meet.
I met my largest side client while at a baseball clinic my son was attending. I was reading a very thick book studying for a certification when a local business owner approached me and said, "Are you in IT?"
Four years later of 15-20 hours per week side work and that chance encounter had an amazing impact on my life.
i have a friend who is a construction contractor, and one of the tasks they needed to do is inspection of a property, and take pictures of problematic areas with notes.
Currently, this is a manual process, paper driven with digital photos, and after wards, somebody back in the office would transcribe the hand written notes into an excel spreadsheet along with pics.
This process could be made easier with an automated app on the phone. I had thought about making such an app, but haven't yet.
I guess when you talk to someone, you naturally gravitate towards issues they have.
She and her cofounder were already in an an industry niche before then as graphics and compression experts, so I'd assume they already had a lot of contacts from former co-workers, meetups, conferences, etc. If you're an expert in something and you meet someone in a related corner of the industry to yours, they'll usually be eager to talk about what they're working on and recommend you to their contacts.
This is a person who obviously has a lot of talent and a lot of specialised knowledge. I doubt most people can get properly paid consulting work or get to product stage as fast as she clearly could.
Many developers believe that conversations "just happen" for some elite breed of networked/famous/etc developer that excludes them. Sales conversations generally don't "just happen", for anyone. You write some pitches and make some calls.
I'd like to see some responses to this from some gurus. I have the same problem. I have a bunch of generalized skill but I feel not enough to make large $ with consulting.
OT, but referring to the article: why are so many websites allergic to serving basic HTML these days? You get a lovely white page with a Javascript blocker if you try to open this article. What's particularly offensive about this one is that all the raw data is loaded in correctly anyways - the JS appears to just fiddle with making it look right, and there's no default style for if that doesn't happen.
The article loaded fine on my old iPhone 5s. I leave JS enabled tho because I don't believe in the Fake Idea that the web should work for me without it.
Observe what people are doing inefficiently that you can fix.
Test whether they'd buy it with google adwords or facebook ads and conversion rate to filling out the form and putting in credit card. Refund everyone.
Imagine how it would be viral and test your hypothesis as well. So your customer acquisitin cost goes down exponentially!
So basically she worked hard on her skills and invested a lot of time and effort to talk to a lot of people to meet the persons that allowed her to grow her business. Most people don't do that and complain. ;-)
Interesting about the 50-50 split. If you talk to most people in the valley, they would probably tell you this is the worst thing you can do. That is, if you're looking from the perspective of a VC.
I've also read a bunch of articles that suggest unequal splits, and the reasons they cite seem to boil down to the idea that the split should reflect the proportional risk taken, and not much else. There are times when founders truly take the same amount of risk, and an even split is justified under the common VC thinking.
In my limited experience pitching to VCs, as someone in an even-split startup, I believe VCs do prefer to have a primary person responsible who is in the CEO seat and has authority to make unilateral decisions. I can imagine an uneven split makes it clear when that's the case. I'm certain many of them have seen cases where even split partnerships were made more difficult and ended up being unfair largely because of the even split. I'm also sure that there are cases where it's harder for them to communicate and negotiate with multiple founders rather than one.
Those reasons don't matter if you're not taking funding, so even split in a contracting partnership (even split effort), turned profitable product startup that doesn't deal with VCs makes a lot of sense.
We're talking about a small consulting shop here at the start, where the paycheck comes form the actual work. Makes a lot of sense. No VC would touch that kind of business at that point anyway, not scalable.
Even later on, once they have a product, why would you change that? 50-50 is great, since you need both parties to agree to do something, which is essential in a small business like this.
VCs want to avoid the possibility of deadlocks when it comes to control - it's an easy box to check off when it comes to protecting the investment. But realistically, even at 51/49 or 60/40, if the disagreements are serious enough at an earlier stage the company is probably in a bad place anyway.
It's not the 50-50 split that's bad, it's the part where you don't talk about vesting. I have a friend who confounded a startup with another guy. It started with my friend agreeing to put in $20K and some advice, the other guy working full time, for a 50-50 split. After one year my friend has put in $200k+, worked full time building business, marketing, etc, while the other founder does his own job poorly.
They agree my friend deserves more equity, but can't agree between a 70-30 or 80-20 split, so other founder hires lawyer and holds my friend hostage for a lucrative buyout. Company is now worth significant amount of money almost solely to my friends hard work/investment, but legally he can't move forward until co-founder signs off on every decision.
I have a question regarding startup growth so I apologise in advance if its irrelevant here (haven't read the article to be honest).
1) I get that to get the first users, you have to go out and recruit them. That's the advertisement part. So yeah, I get how you get users by advertising.
2) I get that when you have a million customers, they become the advertisement and they are the ones who are bringing you new customers. Your product "ad surface" is way bigger than simple banners through them.
Now what I have a hard time to understand is how 300 users procures the same effect as 2) (or even 3000). I get that they gonna get you 30 more customers by talking about your product to their "friends" who, if everything goes fine, at their turn gonna bring you 3 more customers who gonna bring you 1 more customers, for a grand total of 34 more customers. And that's the end of it. That wont grow much bigger. So basically, you would have to go back to 1) to get new users.
What am I missing? Does a user have to bring you n more new customers, n > 1? How many customers do you need via advertising so that the compound growth effect kicks in?
edit: I can see actually 2 types of compound growth effects: a) a user explicitly recruit another user (ex: "hey my friend, come play to this game"), b) a non user "see" other people using the product and he tells himself that might be a good idea to try it.
Anyway, so basically, what I see is that, early on, you can rely only on a) so, in average, your customers have to get you n more new customers, n > 1, by explicitly recruiting them for you. Which, if Im correct here, would give an idea how badass the product must be.
New customers come from two primary sources: 1) marketing and 2) referrals. Marketing is things like events (trade shows, media hits, advertising, reviews, etc). None of those things happen without outreach on your part. Referrals are when (as you described) existing customers tell other people and a few of them try your product. This will not be constant, right after a customer buys your product/service, they may be excited and tell some friends. Best to model referrals over time with cohort analysis.
At the same time, you will lose existing customers. Like referrals, this is best modeled as cohort analysis. After a customer signs up, after 1 month, x% will leave, next month, a different %, next month yet another %. Typically the churn rate declines for a given customer cohort over time (though there may be bumps along the way).
So, you have customer inflow and outflow. It would be nice if there was a simple formula, but the marketing efficiency, the referral rates and churn rates will all be constantly changing. So, there is no way to know in advance if or when compound growth kicks in until you have solid data. It will vary by market, company and product.
It's not either-or, advertising and virality (what you're calling "n", and the cool kids in the back of the room call "k") go hand-in hand.
K > 1 is a runaway train, hold on. It happens rarely and apparently when it does, it's the ride of one's life. (Apparently, anyhow - I've never experienced it.)
K < 1 is still extremely useful - think of it as a marketing amplifier. So if you're paying $10 per click on Google Adwords, an your conversion rate is 2% for those clicks, you're paying $500 for one customer.
Implement some application flows that incentivize referrals, get that k to, say, 0.25, and now that $500 is getting you 1.25 customers - and your cost per customer has dropped to $400. That allows you to outbid your competitors for those adwords. (Except of course that they're also focussing on virality.)
Could totally relate to author's personal experience because this is what my biz partner and I are going through right now. Great article by the author.
I was fortunate to see the author speak at a conference not too long ago, I really enjoyed it. Like her, I have had several bad experiences at tech companies and would just like to not ever work in one again. So I am very envious of her story and it's really cool to see how it has worked out for her and partner. (Unlike her, I don't really have contacts and I don't think I would be very good at the sales side of being a contractor.) Anyway, very inspiring stuff!
I like the people I'm working with, am paid well, have a good work environment and have interesting work to do, but for some reason I'm not happy and feel on the verge of burnout (if it hadn't happened already). I've done startups in the not too distant past and while they were a lot more stressful (and paid very little - we had some funding and had revenues but we never broke even), I was definitely happier working in my own thing. My problem is similar to yours. My personal network is good for changing jobs, but I have no idea how to make it work for consulting work or a startup and I'm really terrible at networking and find it difficult to talk to people (or at least, I find it difficult to strike up conversations - after that I'm not too bad). I also feel like my skills aren't very useful broadly speaking. Maybe it's imposter syndrome because I am good at my day to day work (which can be quite complex).
I enjoyed the article though. It gives me hope that perhaps I can push myself and improve to the point where I can make something work. The thought of going out selling is a scary one to me though.
[+] [-] siliconc0w|8 years ago|reply
One pragmatic strategy to find product/customers:
There is a lot of 'cybernetic' processes that are a mix of humans with domain knowledge and machines with spreadsheets for schemaless storage and querying. Generally the move is to encode the domain knowledge into code and standardize the storage (i.e excel -> RDMS) to make it more useful.[+] [-] ams6110|8 years ago|reply
Talk to the users, try to find out how many others are also using it. Rewrite it in modern technology, sell it back to all the current users (and ideally, also sell to others in the same line of business who might need it).
[+] [-] Mikushi|8 years ago|reply
On top of that consulting opens door, you get very valuable insight inside certain industries and get paid for it.
Also, I'm sure I'm not the only one who is not interested in the slightest in building a unicorn or dealing with investors/VCs.
Building software with no clients requires capital, I'd rather keep mine for my family rather than burn it in the wind into something that is most likely to fail.
[+] [-] themgt|8 years ago|reply
And then ideally via the consulting you find a niche(s), build your own processes & tooling for your niche to deliver value to clients, and then can product-ize once you actually understand the space and the market, who the customers will be and how to reach them, because you're already doing it via the consulting and just need to scale up.
It also serves as a sanity check that you're actually building something that has value, because you prove it to yourself via invoices for your work rather than investment in an idea.
[+] [-] chubot|8 years ago|reply
So I don't think it's a foolproof scheme, unless your solution is also programmable/customizable, which is a lot of work.
[+] [-] jroseattle|8 years ago|reply
Your advice is spot-on, although I would likely CAPITALIZE the words "build something better". Not so easy a proposition.
[+] [-] sethev|8 years ago|reply
[+] [-] kimsia|8 years ago|reply
This is exactly what I did!
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] _lbaq|8 years ago|reply
I started and 10 years later made a successfully exit from my company, we never raised any money, the above figure is what it took us to go from financing our development our self (by having two jobs), to having enough customers to break even.
I think everyone should, bootstrap one company to get a feel for how it is, will make you a better entrepreneur.
[+] [-] simonswords82|8 years ago|reply
I launched Atlas in 2007, just one year prior to the economic crisis that followed. Nothing ensures that you keep an eye on every bill that is paid and focus ruthlessly on efficiency gains more than a global financial catastrophe. Getting through that taught me I was capable of running an already tough business under pretty much any circumstances, and gave me an incredible confidence boost.
Not that I'd recommend it, definitely some of the toughest years of my working career.
[+] [-] shubhamjain|8 years ago|reply
[+] [-] thomk|8 years ago|reply
That's step 1. Step 2 is give them some solid advice in the form of a few things to try. Say "Well here's what I would do" and tell them what you'd do. If they keep asking questions, tell them something along the lines of "I did something like that for another guy and charged him $X/hour, you want me to stop by?"
Mentioning an hourly rate lets them know that even though this might be a hobby for them, its not a hobby for you. It also weeds out the tire kickers.
[+] [-] jahbrewski|8 years ago|reply
[+] [-] 300bps|8 years ago|reply
Four years later of 15-20 hours per week side work and that chance encounter had an amazing impact on my life.
[+] [-] chii|8 years ago|reply
Currently, this is a manual process, paper driven with digital photos, and after wards, somebody back in the office would transcribe the hand written notes into an excel spreadsheet along with pics.
This process could be made easier with an automated app on the phone. I had thought about making such an app, but haven't yet.
I guess when you talk to someone, you naturally gravitate towards issues they have.
[+] [-] stephenboyd|8 years ago|reply
[+] [-] skybrian|8 years ago|reply
[+] [-] scandox|8 years ago|reply
[+] [-] patio11|8 years ago|reply
Many developers believe that conversations "just happen" for some elite breed of networked/famous/etc developer that excludes them. Sales conversations generally don't "just happen", for anyone. You write some pitches and make some calls.
[+] [-] tertius|8 years ago|reply
I don't attribute this to impostor syndrome.
[+] [-] mixmastamyk|8 years ago|reply
[+] [-] mobitar|8 years ago|reply
[+] [-] ivanbakel|8 years ago|reply
[+] [-] btown|8 years ago|reply
[+] [-] dcwca|8 years ago|reply
[+] [-] whateveracct|8 years ago|reply
[+] [-] EGreg|8 years ago|reply
Test whether they'd buy it with google adwords or facebook ads and conversion rate to filling out the form and putting in credit card. Refund everyone.
Imagine how it would be viral and test your hypothesis as well. So your customer acquisitin cost goes down exponentially!
[+] [-] itwy|8 years ago|reply
[+] [-] k__|8 years ago|reply
Most people have neither or just the first one.
[+] [-] jwildeboer|8 years ago|reply
[+] [-] valuearb|8 years ago|reply
[+] [-] westoque|8 years ago|reply
[+] [-] dahart|8 years ago|reply
I've also read a bunch of articles that suggest unequal splits, and the reasons they cite seem to boil down to the idea that the split should reflect the proportional risk taken, and not much else. There are times when founders truly take the same amount of risk, and an even split is justified under the common VC thinking.
In my limited experience pitching to VCs, as someone in an even-split startup, I believe VCs do prefer to have a primary person responsible who is in the CEO seat and has authority to make unilateral decisions. I can imagine an uneven split makes it clear when that's the case. I'm certain many of them have seen cases where even split partnerships were made more difficult and ended up being unfair largely because of the even split. I'm also sure that there are cases where it's harder for them to communicate and negotiate with multiple founders rather than one.
Those reasons don't matter if you're not taking funding, so even split in a contracting partnership (even split effort), turned profitable product startup that doesn't deal with VCs makes a lot of sense.
[+] [-] quickConclusion|8 years ago|reply
Even later on, once they have a product, why would you change that? 50-50 is great, since you need both parties to agree to do something, which is essential in a small business like this.
[+] [-] katzgrau|8 years ago|reply
[+] [-] valuearb|8 years ago|reply
They agree my friend deserves more equity, but can't agree between a 70-30 or 80-20 split, so other founder hires lawyer and holds my friend hostage for a lucrative buyout. Company is now worth significant amount of money almost solely to my friends hard work/investment, but legally he can't move forward until co-founder signs off on every decision.
[+] [-] quadcore|8 years ago|reply
1) I get that to get the first users, you have to go out and recruit them. That's the advertisement part. So yeah, I get how you get users by advertising.
2) I get that when you have a million customers, they become the advertisement and they are the ones who are bringing you new customers. Your product "ad surface" is way bigger than simple banners through them.
Now what I have a hard time to understand is how 300 users procures the same effect as 2) (or even 3000). I get that they gonna get you 30 more customers by talking about your product to their "friends" who, if everything goes fine, at their turn gonna bring you 3 more customers who gonna bring you 1 more customers, for a grand total of 34 more customers. And that's the end of it. That wont grow much bigger. So basically, you would have to go back to 1) to get new users.
What am I missing? Does a user have to bring you n more new customers, n > 1? How many customers do you need via advertising so that the compound growth effect kicks in?
edit: I can see actually 2 types of compound growth effects: a) a user explicitly recruit another user (ex: "hey my friend, come play to this game"), b) a non user "see" other people using the product and he tells himself that might be a good idea to try it. Anyway, so basically, what I see is that, early on, you can rely only on a) so, in average, your customers have to get you n more new customers, n > 1, by explicitly recruiting them for you. Which, if Im correct here, would give an idea how badass the product must be.
[+] [-] rmah|8 years ago|reply
The long answer...
New customers come from two primary sources: 1) marketing and 2) referrals. Marketing is things like events (trade shows, media hits, advertising, reviews, etc). None of those things happen without outreach on your part. Referrals are when (as you described) existing customers tell other people and a few of them try your product. This will not be constant, right after a customer buys your product/service, they may be excited and tell some friends. Best to model referrals over time with cohort analysis.
At the same time, you will lose existing customers. Like referrals, this is best modeled as cohort analysis. After a customer signs up, after 1 month, x% will leave, next month, a different %, next month yet another %. Typically the churn rate declines for a given customer cohort over time (though there may be bumps along the way).
So, you have customer inflow and outflow. It would be nice if there was a simple formula, but the marketing efficiency, the referral rates and churn rates will all be constantly changing. So, there is no way to know in advance if or when compound growth kicks in until you have solid data. It will vary by market, company and product.
[+] [-] rfrey|8 years ago|reply
K > 1 is a runaway train, hold on. It happens rarely and apparently when it does, it's the ride of one's life. (Apparently, anyhow - I've never experienced it.)
K < 1 is still extremely useful - think of it as a marketing amplifier. So if you're paying $10 per click on Google Adwords, an your conversion rate is 2% for those clicks, you're paying $500 for one customer.
Implement some application flows that incentivize referrals, get that k to, say, 0.25, and now that $500 is getting you 1.25 customers - and your cost per customer has dropped to $400. That allows you to outbid your competitors for those adwords. (Except of course that they're also focussing on virality.)
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] gt2|8 years ago|reply
[+] [-] jbchoo|8 years ago|reply
[+] [-] jmnicolas|8 years ago|reply
[+] [-] Kiro|8 years ago|reply
What is this referring to exactly? Administration fees for starting a company?
[+] [-] draw_down|8 years ago|reply
[+] [-] dkersten|8 years ago|reply
I like the people I'm working with, am paid well, have a good work environment and have interesting work to do, but for some reason I'm not happy and feel on the verge of burnout (if it hadn't happened already). I've done startups in the not too distant past and while they were a lot more stressful (and paid very little - we had some funding and had revenues but we never broke even), I was definitely happier working in my own thing. My problem is similar to yours. My personal network is good for changing jobs, but I have no idea how to make it work for consulting work or a startup and I'm really terrible at networking and find it difficult to talk to people (or at least, I find it difficult to strike up conversations - after that I'm not too bad). I also feel like my skills aren't very useful broadly speaking. Maybe it's imposter syndrome because I am good at my day to day work (which can be quite complex).
I enjoyed the article though. It gives me hope that perhaps I can push myself and improve to the point where I can make something work. The thought of going out selling is a scary one to me though.
[+] [-] sniper007|8 years ago|reply
[deleted]
[+] [-] goingbananas|8 years ago|reply