It’s a Great Time to Be An Entrepreneur

Echoing many of the things I’ve been saying, Joe Kraus has a great piece on how cheap it is to start a web company. I can provide a couple of additional data points. I started ONElist with $5K. That lasted from January 1998 to June 1998 (it was cheap even back then to launch a start-up). I then raised $50K from a friend and that carried us through the rest of 1998, at which point we had 1M users and raised VC. I started Bloglines with $50K. That lasted the first year.
You don’t pay salaries at these levels of funding. Everyone works for stock. The main costs end up being hardware and hosting (and possibly development if you outsource some stuff to eLance or another service). I took different approaches to hardware with ONElist and Bloglines. WIth ONElist, I rented machines from Digital Nation. With Bloglines, I purchased the machines and hosted them at a local co-lo. The advantages of renting machines are that you have a lower up front cost and you don’t need as much sysadmin experience, because they will handle a bunch of the work for you. The advantages of purchasing are that it’s cheaper in the long term and you’re not limited in your hardware selection. Now that I have experience with both approaches, in general I’d probably go with renting. Renting saves a lot of effort (configuring and racking machines is work), and costs less in the beginning. This lets you get your start-up out the door more quickly and cheaply. And that’s a good thing.


AlwaysOn Open Media 100

I’m flattered to be included in the AO/Technorati Open Media 100 in the Toolsmiths category. Thanks to everyone involved!

Reaction to Stealth Start-Ups Suck

Greetings from Tokyo. The response to Stealth Start-Ups Suck has been fantastic so far, both pro and con. Thanks to everyone who’s been commenting on it. You can track people talking about it through this link for Bloglines citations.
I didn’t mean to specifically pick on 24 Hour Laundry and I didn’t realize others had already been doing so. I don’t know them and I’m sure they’re nice and smart people. The CNET article about them was just the trigger that got me to write that piece. Actually, a meeting ealier in the week with a friend who has his own stealth start-up really got the ball rolling. I implored them to publically launch their service and I hope they do soon.

Stealth Start-Ups Suck

There’s been a small rash (ouch, you should see a doctor about that…rimshot) of press coverage about the new stealth web start-up 24 Hour Laundry. Who knows what they do, but whatever it is, they’re doing it wrong. Here’s the thing, stealth mode for a web start-up is the kiss of death.

Stealth mode is when a company is operating in secret for some length of time before launching their product or service. In many industries, creating a new product or service takes significant time and effort. During this time, being in stealth mode may make a lot of sense. But creating a new web service is not rocket science and does not take a lot of time or money. My rule of thumb is that it should take no more than 3 months to go from conception to launch of a new web service. And that’s being generous. I’m speaking from experience here. I developed the first version of ONElist over a period of 3 months, and that was while working a full-time job. I developed the first version of Bloglines in 3 months. By myself. It can be done. And I suck at it! Just ask all the engineers who have had to deal with my code.

Why go fast? Many reasons:

  • First mover advantage is important.
  • There is no such thing as a unique idea. I guarantee that someone else has already thought of your wonderful web service, and is probably way ahead of you. Get over yourself.
  • It forces you to focus on the key functionality of the site.
  • Being perfect at launch is an impossible (and unnecessary and even probably detrimental) goal, so don’t bother trying to achieve it. Ship early, ship often.
  • The sooner you get something out there, the sooner you’ll start getting feedback from users.

Why is first mover advantage important? You get to define the space. Any future competition will be compared to you, which gives you continuous mindshare. Your service will become synonymous with the functionality you provide. Now, there are caveats to this. Neither ONElist nor Bloglines were exactly first in their respective fields. But the competition had not gained critical mass and the core functionality of each competitor didn’t work well.

Some people think that they need to stay in stealth mode as long as possible to protect their exciting new idea. I hate to break the news to you, but unless you’re Einstein or Gallileo, your idea probably isn’t new. I have this theory. The success of a web service is inversely proportional to the secrecy that surrounded its development. There are exceptions of course. But I also think this can be applied to other things. Segway, anyone?

Web services have many advantages over shipping software. You can continuously update the service, fix bugs and add new features. There are no long development cycles. Embracing this is a key to success. The first version (or several versions, probably) of any service you create is most likely going to suck. And that’s ok. Your service won’t scale to handle a lot of traffic. It will be missing a huge amount of functionality. It’ll probably look bad. And it’ll have bugs. All of this was true for both ONElist and Bloglines, but they both ended up reasonably ok. Because you can continuously update the service, you can deal with these issues.

One of the many great things about running a web service are the users. A passionate user is one of your greatest assets. And I would argue that the only thing of real value a web service has is its users. They act as advertising for you, telling all their friends about your service. They are the best source of new feature ideas. And they are the best Q.A. testers you can get. Most importantly, they’re the gauge that tells you whether your service is actually useful or not (ie. is it worth losing years of your life continuing to develop and run it). By getting your service launched as quickly as possible, you’ll get exposure to this wonderful resource sooner. By listening to your users as you add features and improve the service (because, remember, it won’t be perfect at launch), your users feel like they are a part of the process. They start to have a sense of ownership of the service. Which reinforces their passion. And with the constant updates and fixes to your service, you’re continually giving your users reasons to talk about you. Users are the one thing that your competition cannot copy and develop internally. Technology can be copied. Users have to be earned. One thing to remember, however, is that you need to be responsive to customer support, because that’s one of the key ways to cultivate passionate users.

I’ll end this rant now. I don’t mean to single out 24 Hour Laundry, they’re probably nice people. But they were the ones that reminded me of this. I could also rant on how you only need a couple of people to create a web service and that starting one doesn’t require a lot of money (and oftentimes raising a lot of money actually screws things up). But I’ll save those for another day.

Is There Something Special About The Third Week of June?

Is it me, or is every single conference scheduled for the week of June 20? Here’s what’s up:

A Moment of Thanks

I’d like to send a quick thanks to the California Highway Patrol and one particular officer who did not give me a speeding and/or reckless driving ticket yesterday. Driving down the Peninsula on 280 on a warm sunny day with the top down, the engine was purring, begging to go faster, and the stereo was blasting the latest disc from Queens of the Stone Age. It was pretty close to a religious experience. So no wonder I didn’t see the cop pull up until I caught a glimpse of his front bumper in the lane next to mine. Looking at the speedometer, I was traveling at about the same speed as what’s considered ‘slow cruise’ in the Citabrias that I fly. That’s most likely slower than you think it is, but it was definitely well north of the posted speed limit. The friendly officer camped out abeam of the passenger door of my car for several seconds until I realized what was up and slowed down. He then continued on his way. Thanks Mister Officer! I promise to try to not do that again.
Of course, it is a pretty nice day out right now….