Software Startup Strategy

Start by writing software for smaller companies, because it’s easier to sell to them. It’s worth so much to sell stuff to big companies that the people selling them the crap they currently use spend a lot of time and money to do it. And while you can outhack Oracle with one frontal lobe tied behind your back, you can’t outsell an Oracle salesman. So if you want to win through better technology, aim at smaller customers.

They’re the more strategically valuable part of the market anyway. In technology, the low end always eats the high end. It’s easier to make an inexpensive product more powerful than to make a powerful product cheaper. So the products that start as cheap, simple options tend to gradually grow more powerful till, like water rising in a room, they squash the “high-end” products against the ceiling. Sun did this to mainframes, and Intel is doing it to Sun. Microsoft Word did it to desktop publishing software like Interleaf and Framemaker. Mass-market digital cameras are doing it to the expensive models made for professionals. Avid did it to the manufacturers of specialized video editing systems, and now Apple is doing it to Avid. Henry Ford did it to the car makers that preceded him. If you build the simple, inexpensive option, you’ll not only find it easier to sell at first, but you’ll also be in the best position to conquer the rest of the market.

It’s very dangerous to let anyone fly under you. If you have the cheapest, easiest product, you’ll own the low end. And if you don’t, you’re in the crosshairs of whoever does.

Sage strategic advice from Paul Graham on running a software startup. He wrote it in 2005, but it is true today.

Wisdom from 37Signals

Jason Fried @ Big Omaha 2009 from Big Omaha on Vimeo.

Quote: We would rather have 40% of…

We don’t want to own 100% of many things because the collaboration has been enormously beneficial…We would rather have 40% of a big success than 100% of a failure.”

– Carl Johnson, cofounder, Anomaly

Today I am Friends with a Celebrity

Andrew Smiley, a friend from our small group and local southsider, was featured on the front page of the indystar today (he’s on the left in the picture above).  Nice work, Andrew!

Quote: Too many men I have known live lives seeking…

Too many men I have known live lives seeking fame, fortune, recognition and rewards, comfort and meterial things, and financial security.  Their priorities begin there, and – since those things don’t tend to leave time for anything else – they usually end there.

– Tony Dungy, former head coach of Indianapolis Colts and author of Uncommon

Happy Father’s Day, Dad.  Thanks for living with uncommon priorities by placing people before possessions.

Bailout Costs vs. Historical Event Spending

What these bailouts are really costing us.

Quote: Running a start-up is like…

Running a start-up is like being punched in the face repeatedly.  But working for a large company is like being waterboarded.

– Paul Graham, Y Combinator founder and Start-up guru

Fear and Swine Flu

According to the Centers for Disease Control and Prevention, heart disease is the leading cause of death for both men and women.  In 2005, 652,091 people died of heart disease.  Moreover, approximately 37% of adults reported having two or more of six risk factors for heart disease and stroke (high blood pressure, high cholesterol, diabetes, current smoking, physical inactivity, and obesity).

So to summarize: a lot of people take no steps to prevent THE most statistically probable cause of death.  If they would stop smoking, exercise, and eat healthy then they would put a huge dent in a good portion of the risk list and possibly save their own lives.

But…

They will wash their hands religiously and talk non-stop about how to prevent the spread of Swine flu.  About 150 people in Mexico have died of Swine flu.  In the US, 66 cases of the pig bug have been reported along with one fatality.

It seems like people are more afraid of the uncontrollable than they are of the actual risks.  I know that if I take horrible care of my body, then I might get a heart attack.  But I control that risk to some degree.  Becoming ill from a virus is random and less controlled.  It stirs up more fear and gets better ratings on the news.

And sometimes fear leads people to take extreme actions with more negative consequences than the initial feared problem itself.

To Forecast or Not to Forecast

Forecasting.  This word stirs in me a mix of love and hate feelings.  Early on in my career I had an abnormal fixation with excel spreadsheets.  Business to me was about pro forma statements and linked excel formulas.  I can still create a mean worksheet, but my perspective has changed.

Recently I have been forecasting for Elias.  Initially I considered business school thinking: What is the total market size for ecommerce?  Now how much of that market can we capture? etc…  The problem is that these numbers are crap.  Every novice business plan seems to include something like this market estimate along with, “If we just capture 1% of the market then we will make a fortune!”  When has this really worked for a start-up?

Instead, I have been working from the bottom up.  Elias provides a service, which means that we add value to our customers by using time to implement technology.  The upside to this is that we have little risk in terms of cost (depending on how you value time in the equation or account for opportunity cost).  The downside is that we sometimes have to turn away customers when we do not have enough time to sell.  It is essentially a scalability problem.  The challenge: how to package expertise so that it provides value to customers without an increase in time.  The formula must be reworked.  In the meantime, my forecasting is based on the number of projects Elias can take on and still fulfill commitments in a timely manor. That’s the most effort I’m willing to invest on forecasting revenue.  The variable which can be controlled is cost.  A start-up should be able to predict with relative accuracy the costs associated with doing business.  This is the kind of forecasting that warrants being intimately familiar with the numbers and watching them like the first time you met your wife, that is, study them passionately.

And that’s it.  Really the focus should be on the customer and cashflow.  Too much focus on forecasting and setting goals can actually have a negative effect on an organization over the long haul.  Make customers happy and collect money.  This is the primary objective for a start-up.

Find of the Day: Passpack

For some reason I have a knack for finding helpful things online.  It started with an emailed link from time to time to my partners.  Now we have taken to crowning the really good finds with the term “Find of the day” and made the discoveries into something of a game or contest among us.  It just seems selfish to keep some of these treasures of the web to ourselves.

Today’s featured “find of the day” comes to us thanks to Eric Clark. Eric, the organzied planner among us, has been maintaining a growing spreadsheet of web passwords.  He did this until discovering Passpack – a free online password manager.  Passpack took about 5 minutes to set-up and I can now manage that spreadsheet of passwords from a secure online portal.  Watch this video to learn more or sign up for an account yourself to test it out.

Hopefully our days of wasted password reset time are gone.