Startup business on part time basis. More convined based on Ning & StackExchange news

I posted here about starting an online business in your free time. There are many advantages to this like, no need for outside money, total control on everything, fun, and a terrific learning experience and for advancing technical skills based on real work.

I have seen SO many online services taking in VC or angel money, hiring people and having a ll kinds of expenses and I always ask myself how do these companies make a profit after clearing all the expenses.

And then I hear news like Ning laying off 40% of their workers and discontinuing free offering. Stack Exchange taking VC money and changing their business model. (In SE's case, I am not sure they were profitable or not profitable enough, regardless of Joel's talk about trying to make the Internet a better place)

Making a profit from freemium models seems to get harder as one looks closely at it. Too much competition and there's so much anyone can make payments to all these services.

That's why I get more convinced that I won't quit my day job and start something new with lots of risks. I would HOWEVER my non work time to create an online business. Find people who want to help without getting paid, in the hopes something profitable comes out of it.

Question after this rant: Anyone knows of successful online services based on someone's hobby or not giving it full time attention? Would you start something like this yourself? Don't you think it's great to make money with minimum or even zero risk?

The lesson from Ning is that giving too much stuff away for free is a poor business model. As DHH blogged today, we really should have learnt this by now!

Stack Exchange were kind of the opposite. They tried to charge but didn't find a market at their price point.

I may be straying from your question, but I see three very distinct economies at work on todays Internet, and I think Ning and Stack Exchange V1 kind of missed the desirable one in the middle...

• There's the FREE economy, inhabited by lots of consumers who would never pay for a web service and have limited loyalty to any one platform or tool. The companies who provide these services are in a lottery, hoping to build huge audience that can then be sold to a 'greater fool' with deep pockets. Ning were squarely here, and didn't win that lottery despite investing an awful lot in tickets!
• There's the PROFESSIONAL economy, inhabited by tens or hundreds of millions of people and firms who actually pay for software and services to help them get a job done or a business built. This is a huge, huge market, comprised of ambitious career workers, web entrepreneurs, webmasters, small businesses etc - the kind of people who generate grassroots innovation and build the communities that Ning and Stack Exchange support. This professional economy is however price constrained - we'll take a punt on a platform or tool for < $50 a month, but anything more than that requires a bigger commitment and so less speculative implementations occur.
• Finally, there is the ENTERPRISE economy, inhabited by companies who are not price constrained at all. They will pay any price if value can be demonstrated, but tend to need direct sales rather than purely online sales based on word of mouth marketing. I think Stack Exchanges price point edged it out of the desirable middle economy into this segment. The thing is, with the right enterprisey sales and marketing, maybe they could be selling it into large corporates as a $20k per seat enterprise collaboration platform or some malarkey.

I could be wrong, but that middle ground looks the most appealing to me!

The lesson.... Know your market, know your ideal and typical customer, know how to find them, and know what they are willing to pay!

Coming up on 80 views, and regrettably the silence speaks for itself - I don't think there are any notable ventures that have come purely out of somebody's part-time efforts. It's great to make money with minimum or zero risk, but name one venture that's well known and successful based on this principle.

After participating on this site, I've become a big believer in "The Four Steps to the Epiphany", so I'll disagree with your "build something in the hopes something profitable comes out of it" comment - even if you're doing something part-time, you owe it to yourself to find out whether it will fly before you spend time and effort on it. You could have been working on something better, after all :-)

As slatecaster correctly indicated, STARTING a new venture on a part-time basis is often the only way, unless you find someone willing to underwrite you entirely.

However, SUSTAINING a venture on a part-time basis is dependent on a lot of variables:

• Whether the logistical demands of your new venture can be accomodated in your off hours
• Whether you can find others who share (or are inspired by) your vision (read "no pay")
• Whether your customers will be happy with only being able to reach you at certain times

With running a part-time business:

• You'll be more worried about a competitor who might be willing and able to spend more time/effort on solving the same problem and pulling ahead of you. Not that you wouldn't worry about this with a full-time business :-)
• You may come to the realization that to "take it to the next level", you need to make the leap and spend more time on it

After going full-time, you may still end up failing - but at least it won't be because you haven't given your all. This would be where products/markets/fits/pricing become relevant.

Before your business reaches the point where it can support you, similarly to your full-time job, there are not that many option but to start it on a part-time basis. Try it, if it picks-up and starts generating enough cash, possibly you can scale-down your job and dedicate more time to your business. Don't quit your job, which brings hard cash in return for possibly wrong assumptions. After all, you can't pay your bills with the promises of business potentials.

Good luck.