Old and wise developer - Startup founder newbie


11

I'm a software developer/development manager with more than 18 years of hands on experience. For a year now a wonderful idea has fermented in my head. All the research I've indicates there is no comparable service anywhere on the net.

Fate played its cards and I was laid off along with many others from the financial industry. This triggered a strong desire to take a risk and implement my idea - launching a new web 2.0 SaaS company.

I have heard many different opinions on the path I should take. Basically it drills down to the following schools:

  • "Marketing first" : Create screen mockups, killer presentation (showing revenue streams), provisional patent application, and do whatever you can to get meetings with angels and VCs - trying to raise capital - even before a single line of code is written.
  • "Semi-Bootstrap ": You must have a working launch/beta in order for VCs to be remotely interested in your work, naturally this also includes everything listed in the "marketing first" item: presentation, business plan etc.
  • "Run luke, run! ": Don't worry about VCs or angels now as no one will invest in an idea from a "smalltime" person such as yourself who founded his first startup and has no previous success to boast. Implement your idea, launch it, and support it with your own money until you build a name for yourself, even at the price of remaining remaining small and unfunded for a while. You must however protect your idea with patents. If you're successful, angels and VCs will follow later and you'll have more leverage when negotiating with them.

I'd like to hear your opinion. In the mean time, I'm going with "semi-bootstrap".

Venture Capital Angel

asked Jan 4 '10 at 01:56
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Ron M.
4,224 points
Get up to $750,000 within 24 hours with a small business loan from Clarify Capital
  • +1 on building first, seeking capital second. – Olivier Lalonde 9 years ago
  • Good Question Ron. The guys below have already given the answer I was going to (build it and they will come). Best of luck! – Denis Hennessy 9 years ago

5 Answers


10

Hey Ron. I'm sorry about getting laid off, that couldn't have been fun. If you want a quick bolt of inspiration read Steve Jobs take on getting fired:

http://news-service.stanford.edu/news/2005/june15/jobs-061505 You should stop analyzing this situation and give yourself a short deadline and build something. Whatever it is your dreaming about, there is probably something that it does about 90% of the time right? There's like one screen that if it existed someone could accomplish what you want them to accomplish. And then get that into people's hands.

I pray that this is an application that you yourself need. Things are going to be so much easier if you are your own best customer. If it isn't you're going to need to do a lot of work getting things into your customers hands so they give you the feedback you need to achieve success. There's some smart guys like Steve Blank and Eric Ries talking about lean and minimum viable products. It's good stuff.

If you are going to read anything though right now, give Getting Real a shot from 37signals. But I would stop thinking so hard, and start putting popsicle sticks and duct tape together to fix the problem you see needs fixing. Then slap a price tag on it and see if people buy it. Don't worry about investment dollars, do you really want a new boss?

We got Inkling started with 18k, and had the first iteration of what it did in about 4 weeks. Gave it away to our first "client" at that time, and used their name as a stepping stone to get a lot more work.

We built a tiny version of tgethr in about 2 weeks of part time work and immediately started using it with our work and with our families. 3 weeks of some polish after that and we immediately stuck a price tag on it and told other people about it. I had a strong feeling it would resonate with people because i was constantly searching for a better solution for myself to do what it does. Sure enough people started putting their credit card in. Of course, we've had to iterate on things as we've heard from other people that weren't getting X, or didn't understand Y.

It really isn't that hard to get something done quickly, for just a little money and start getting traffic to it. Just put your head down, start building the quickest fix to the problem you can think of in a few weeks, and then hopefully you can tell that yes, this fix is a fix and people are willing to put their credit card up for it. If you need money, pick up some consulting/contracting work for 30 hours a week or less?

answered Jan 4 '10 at 02:21
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Nathan Kontny
1,865 points
  • +1 for "do you really want a new boss?" – Coder Dennis 9 years ago

7

Money? You're asking for money based on an idea? The people who put money into that are traditionally the three F's: Friends, Family, Fools.

Bootstrap is the route to go, and not the semi-bootstrap route you suggest, but closer to your third option. Build the product on nothing but what you can put into it, and try to avoid spending much on it if possible. Get a client or two to use it who will pay for it, and then use that money to grow to attract some more clients.

When you make your first presentation to an angel or VC, you should have a steady revenue stream, and be either in the black overall (ideal) or in the black on a monthly basis and on track to be in the black overall in the short term. That way, you have a much better chance of negotiating a fair deal for yourself if you can show that the money to be invested is not needed to maintain growth, but to expand to a different level, and that you could, theoretically, make do with a loan.

answered Jan 4 '10 at 04:29
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Elie
4,692 points

5

With all SaaS companies, no investor nor customer will give you the time of day without some sort of demo, beta or whatever that is functional. Screen shots and mock-up just don't cut it since the barrier to building SaaS applications nowadays is really low. So, you have to build something to show people, regardless of the path you take.

You do need to spend some time figuring out if there is a market for your application. Nathan makes an good point about using your own product. If you can use it and it helps you, then chances are, others will find it useful.

If you really want to pitch to VCs and angels, then you need to nail three things:

  1. Technology: Can it be built?
  2. Market: Will someone buy it?
  3. Team: Can you pull it off?

Even if you don't pitch to angels and VCs, you should answer these three areas so that you know you can build something that can be sold.

If this were me, I would fight like hell to bootstrap this until I was cash flow positive. The sooner you get to cash flow positive, the better position you are in with potential investors.

answered Jan 4 '10 at 02:51
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Jarie Bolander
11,421 points

4

Ron,

Number 3 is most realistic, given the tiny bit of information to work with.

  1. Definitely have a look at Lean Startup (best is to YouTube presentations of it): it's an alternative approach to startupbuilding that has a lot going for it.
  2. As a first time startup, today, alone (no serial startup partner), reality is you have to get to revenue to convince most VCs/Angels. Would the world value you company > $20 million in 3-5 years? If yes, VC/Angels will be interested. If not, not. Good news is what pay as you go cloud infrastructure, social marketing and a great idea, what do you need them for? If your idea really does need more than your own/family/credit to get to launch, reconsider.
  3. Is a patent the best/only way to protect your IP?
  4. Get something designed (paper or screen mockups to get you to something you can talk through and therefore build) and something built (prototype).
answered Jan 4 '10 at 03:00
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Bob Walsh
2,620 points

0

Newborns of many species have two coping mechanisms, struggle and whine, and they use as much of each as they can to get what they need. (Struggle=build on a shoestring and whine=pitch your business to businesspeople). I basically do not think that there is a "right" choice among the three choices you've listed. Some companies will describe their success using one narrative, some with the others, and they will all be right. You should use whatever you can. That means throwing whatever you can at getting a working prototype up and running to the degree that this seems like it will be the best way to survive, but without totally ignoring the market-first side, and not being afraid to pull resources into market-first if suddenly it seems like money may be coming that way.

More than trying to figure out in advance how best to allocate your attentions and energies, I think you have to maintain vigilence and always be aware that you may be wasting your precious time and cash-burn by whatever mix of market-first and product-first strategies you are currently committing to. That heightened anxiety and awareness will make you much more alert to the evolving contingencies of survival that surround your particular startup. Don't try to "settle" this question. The complacency of thinking that you "have chosen" the right startup strategy is way too much past-tense for a startup to indulge in. You don't get to "have chosen" your strategy yet! The narrative of some startups are product-first, others are market-first, others are balance-of-both, some are team-first, some really are mainly about vision (however we may disparage this), and many are wild stories that whipsaw around these themes in surprising ways.

The best thing about these generic strategies (market first vs product first) isn't so much that they be right or wrong, but rather they serve to shake us up. If you have a team of hard-headed product guys, the market-first narrative should help you hold your team's feet to the fire on the marketing side. If your people are mainly about market potential and business models, the product-first narrative can help keep your team grounded and focused on getting something tangible ready ASAP. So rather than using a model to ease tension on your team and get everyone rowing in one direction, use it to keep the tension high and your team primed and ready to jump in the needed direction whenever the alarm sounds.

Seriously, if you are working away at a prototype, and suddenly an angel wants you to pitch based merely on concept and biz model, are you going to refuse the appointment? Hopefully with some cases of Red Bull you'll hammer out a prototype too, but if not, are you seriously going to refuse to plug some values into a spreadsheet?

Succeed by any means necessary, possible and expedient, stay nimble! You can't know in advance which path will one day have proven itself to be your path.

answered Jan 5 '10 at 08:20
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Neil La Chapelle
51 points

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