I think that's the sort of cold shower that a lot of people need. DHH waves his hands about working 10 hours a week, and "all you have to do is ask for money, it's so fucking simple!!!", but the reality is that it's far from simple.
It is simple to ask for money. A lot of apps don't even contemplate doing that.
The hard part though is getting the person to actually give it to you. In order to do that, you need to create something they value, which means, partly, not giving it all away for free in the first place.
Why does 37Signals only have the luxury of working less? I'm sure when they were starting out (for their consulting business, not Basecamp) they had to work hard.
Maybe it doesn't feel like work so much when you really enjoy solving the problem that your software is addressing.
If you build a solution to solve a business problem and have an underserved market ready, then you can make money.
If you build something like Twitter then you need funding.
Personally, I think most people would be over there head if they trying to develop something so generic like a twitter or a video upload site. Not that it is hard but if you are not solving a problem that people are willing and waiting, no begging, to pay for then well you need venture funding for sure. The chances of venture funding is about squat for your average joe.
I'm not sure why I'm responding to someone who didn't seem to actually read the post, but...
It's not a question of whether customers will pay (and that's not what the post is about). It's a question of how many customers will pay and how quickly they sign up.
No one would argue (I hope) that Basecamp doesn't solve a real problem... But it took them 12 months before they could afford to focus on it full-time.
SpanningSync looks cool and quite successful. So does PlentyOfFish, but that doesn't mean that you're any likelier to build an overnight AdSense money machine.
Most bootstrappers I meet think that SpanningSync stories are the norm. They aren't.
I work for a bootstrapped company. Back in 1999 the guy had to borrow $50,000 from his mom because his credit card debt was too much. He was getting about $5000 a month from the sale of a small travel company he sold to the co-founder.
Once he figured out what would work (and that took awhile after a few missed tries) he had his market and intial funding based upon a really bad working demo I created (that would break when more then 1 person was using it at a time and I would have to reboot the server after about 5 minutes or so). The intial funding came from the customers who were going to use it. There were 40 and each paid $3,000. That was enough money to hire some very inexpensive "programmers" from a local trade school and we were able to upgrade the demo into a full product.
The company is doing just fine, has 4000 monthly subscribers, I am making him a new product and I believe he will double the number of subscribers.
I did just read the article :) But I am familiar with bootstrapping. On my own I am about to release "OfficeZilla Pro" and pray that there is enough take up to at least pay the $500 a month hosting bill. I am working on versions for vertical markets and one day will see it to profitability.
Successful stories (bootstrapped or not) aren't the norm. Period.
Most (if not all) bootstrappers are optimistic (and thus willing to risk steady paying job) about their product(s). As are result, they think SS stories are the norm. This will sound strange but if you don't think that way, you will already have lost half the battle.
I don't understand what's so hard to understand about the bootstrap business plan. I'll repeat it:
(1) Consult. (2) Take a half salary. (3) Use the other half to pay for an FT dev. (4) Wean off consulting with product revenue. (5). Vary as necessary.
If you call the developers at my company "half-assed" because of the consultants who currently pay their salary, I'll take offense. Tony Wright is smart, has an awesome product, and has done this before. What's his problem?
I agree that's a great plan (so would 37s, I imagine!). But it's not the one that most people follow because of (IMO) insanely optimistic projections about organic growth/sales fueled by (presumably) word of mouth and, er, TechCrunch.
Depending on the market timing-- the half-assed effort might kill you, too. People who bet big can win big, and people who hedge can lose as a direct result of their hedging-- so I don't think your formula is perfect for all markets or goals.
The half-assed stuff is from a headline from a previous post of mine (that was syndicated on VentureHacks and in BusinessWeek). You're the first to take umbrage that I'm aware of. It was playful and tongue-in-cheek, but you're welcome to take offense if it suits you.
Taking offense always suits me. My question for you: what does it matter whether your market projections are wrong if your company has cash flow? I look at the funded companies that aren't cash flow positive in their 2nd and 3rd years of operation and wonder why people think that's such an awesome plan.
It makes sense to not be cash flow positive in the 2nd and 3rd year if you can show that investing in R&D or sales/marketing will accelerate growth by a nice factor. I think you're oversimplifying.
No, it's a terrible idea for the founders. "2 out of 3 businesses fail. So investors need the third to make up for the other 2." Remember, all three of the companies got pushed into a stupid business plan by the "hockey stick" requirement, when a less risky plan could still have made the founders millionaires.
I don't understand why bootstrappers are any more unrealistic than YC applicants or anyone else starting a company. Folks in the "talking to VC's" loop are often woefully unrealistic about how long it will take to raise funds (and 199 out of 200 won't). Tony writes a great headline but if it's taking longer than he anticipated to make a profit with Rescue Time perhaps he might have abridged the post to the need to focus on the profit model earlier. I find bootstrappers who are consulting in parallel with product and customer development--provided they are working with at least one other person--to be more grounded in reality than the individuals or teams who are seeking money from investors before they have a viable application with paying customers.
Strangely, I think a lot of funded startups are more realistic about the challenges involved. It's well documented. We read about flameouts every day.
All of the bootstrapped businesses that get 6 months into their business and realize it's a much longer road just sorta fade away. We don't hear much about 'em, don't read about 'em... But a lot of people have latched onto the (very inspiring) story of 37s and a few other bootstrap stars. Good on 'em.
The volume of people chasing the (more realistic) 37s-style dream is high, but I've been struck by the unreasoned optimism-- not the "we can build something really good" optimism (which is required, I think) but the "we'll be rolling in money within 6 months". Thus the post!
Regarding abridging my post to say "focus on profit earlier" - nope. I don't think I'd go back and go that route, even if I could... But that's probably another post.
There are very very few funded startups, so the question for me is the comparison between those seeking funding and those that are bootstrapping (seeking revenue from paying customers). I find the former to be much less realistic than the latter but we are probably looking at different data sets.
OTOH, if you are addressing an immediate need; that is, if you have prospects whose hair is really on fire and you can put together a good (not perfect) solution fairly quickly and cheaply, then you have a "sugar daddy".
That's right, a customer who can bootstrap you. You have a nice influx of cash, real user feedback, a raving referral, and a tangible asset in your back pocket as you go out into the world. Not easy, but not unusual either.
Imagine writing software for 3 months, selling the first copy for $50K, and keeping the IP. It's very doable if you know what you're doing. Not a bad springboard for a bootstrapper, huh?
Look at any Mac software company and you will see it again and again --- the white whale of entrepreneurialism! --- companies that achieved success without taking a dime from investors.
This article simply ignores the fact that 37Signals was a thriving business before. they. launched. product. It could have taken them ten years for people to start paying for Basecamp. They would not have gone under.
Actually, he pretty much states that fact directly. 37signals already had the money to survive long term. This article specifically addresses people who think they can work on products full time without a plan for paying the bills for 12 to 18 months (or maybe longer), because its going to take that long to start a business from scratch and generate significant revenues.
They did not have the money to survive long term. They had a business that generated cash flows. There's a huge difference. They didn't inherit it.
My point is, you can do the exact same thing. If you have the talent, consult. Tens of thousands of developers spend their entire lives freelancing. Consulting dev work is not a crazy pipe dream. Now, instead of dropping all your 1099 wages into your bank account, create an LLC, get it an ING account, and send your money there. Hire. BANG. Now you're a business. Go do something cool.
Sounds sensible, but... how common is it, really? If it isn't, what's the missing ingredient that makes it a difficult transition that many people never seem to accomplish?
