By now, everyone is aware that cloud computing (among other recent developments) has drastically reduced the cost of starting a new business, both in time and money. What's not so well known is that this has changed not only how cheaply and quickly businesses can be started, but also how they're started. Rather than draw up an executive summary and business plan, talk to advisors and research the market, it seems like nowadays folks just say "fuck it" and put their foot on the accelerator from day one.
Even those who form a team and raise money are doing this. It's not just the bootstrappers. For instance, I can name 3-4 people in my admittedly tiny sphere who had an idea, raised significant amounts of money, built a product, promptly failed, then pivoted multiple times before running out of cash.
It's as if starting a business has become so easy, that it's easier to just do it and see what happens rather than invest any kind of time and effort in researching the market first. This shoot-first-ask-questions-later attitude is spurred along by stories of huge multi-billion-dollar companies being born out of half-assed "so what now?" pivots. (See Twitter.)
In my experience, it's ok to do this once or twice because in your first at-bat, you don't know what you're doing anyway, so stopping to assess a market is just a waste of time. Put a year or two into something, get a feel for how it's done, and if you don't turn into Mark Zuckerberg (home run on first shot), you'll be better prepared to assess the validity of future projects. (That said, the best of my 4 businesses was the first, so there are exceptions.)
While I admire his entrepreneurial spirit, the author of this article (and his partners?) seem to have taken the "shoot first" philosophy a bit too far. 10 startups in 7 years seems extreme to me. The optics of it, from a potential investor's perspective, seem negative, too.
The best advice I've heard for "shoot first" people is to sell your product before it exists. If you can't convince anybody to give you money on the pitch, then chances are that you won't be able to sell it after it's built either.
Unfortunately this advice doesn't apply well to a lot of consumer, ad-supported startups , but it would apply well to this guy's "modest"(nobody's ever given me $250k for anything) success (GroupScript).
More of argument against consumer startups than against this principle.
"Shoot first" is definitely more widespread (and probably has a better chance of working) on the consumer side.
I have done it on the enterprise side, though, and the experience wasn't all bad. I built a face recognition system to spot TV reporters on the air and auto-tweet. It was a "neat"-enough idea that I was able to get 3 TV stations to run pilot programs. In the end, even though it doubled traffic to the TV stations' live streams, it turns out they barely make any money that way and unflattering screen shots irritated the reporters. You can argue that I should have researched harder up front, but if 3 different top-15 TV groups representing 125+ stations were willing to try it out, it wasn't far off. It was close enough to a big score and took so little time (1 year) to iterate, it was worth the try.
Mark Zuckerburg was offered multiple millions for his earlier business than Facebook...which was his third, not first, business. And yes, starting a business is in fact very easy. For a variety of reasons, I'm technically on my eleventh business...so three of them, all bootstrapped. The idea of raising money is appealing, as it would potentially mean not having to balance between client custom consulting revenue and working on product in my, "Free time." However, until you launch, prove the market, see real results, etc, it's all just a very nice sounding hypothesis.
I stand corrected. I didn't know about his other projects before Facebook. Wikipedia doesn't say anything about being offered multiple millions for a product he'd built, though.
It seems like after the first startup, you realized that Lativa is not a good market for startups. And then you went and created 9 more in Lativa and learned the same lesson over and over.
Plus ten internets to you sir, may this comment go viral. We've been reviewing the article as a team...but, this simple fact had been missed. My cheeks hurt from laughing right now.
all this work seems to span 7 years, and your only significant success was $250k (split ~7 ways) - ouch.
definitely some interesting stories and some ballsy attempts - albeit that there was probably too much focus on opportunistic copy / pasta ideas and capitalising on Latvia's lack of search competition, rather than meaningful value creation.
I guess this is a matter of perspective, couple of years ago $250k looked like success to me if you take into account that salary for a developer in Latvia was about 1,5k usd per month, and the profit was split 3 ways.
And actually I see getgamers.eu (ad network for gaming sites, profitable since Jan 2013) and maxtraffic.com (1.2 years old, will be profitable next month) as my success, both are still active and growing, but did not mention these in the blog post because they have not failed.
Thanks! In the beginning I had no experience and ambitions, and did not even think that Latvia could be too small, but since 2012 all new ideas/projects are built with larger markets in mind.
I think this entrepreneur should be given a little bit more credit than your post suggests:
1) He is willing to share his experiences which I think is brave and should be applauded.
2) He is obviously learning hard won lessons which I think are the best kind. I certainly learnt more from my business failures than successes.
3) Based on his HN comments he seems to have had two successes out of 12 tries (assuming 10 failures mentioned in the blog plus the 2 other tries that are still alive). I think this isn't too bad.
4) He has a location disadvantage. Sure you can argue that the Internet levels the playing field but I don't quite buy it. I don't know for sure but I suspect that Latvia's tech start-up community is nascent compared to other geographic locations. I argue that start-up culture and knowledge are highly valuable and while the Internet can help to transmit this I believe that, "being there is everything".
If I would throw in my two cents in I would kindly suggest to this entrepreneur to:
1. Keep going and maintain momentum
2. Build up a network and start finding complementary team members, and
You are right about Latvia tech start-up community - before 2012 we had only 1 monthly meetup group, and only later TechHub Riga - a co-working space for start-ups was launched, and now it is expanding, and other places are being opened as well. So basically the start-up community is active here for about 3 years.
I sent this article to a few entrepreneurial-minded developer friends who tend to build first, research/think/plan/market later. And to be fair, that's how I used to be too. Startups need builders, but researchers/thinkers/planners/marketers are just as important, if not more so.
How do you research a market from the outside? Especially in digital/saas products where the barrier to entry is already low, it seems to me that the successful people don't want to give up their competitive advantage by telling the world how to reproduce their business model (for good reason).
Start talking to potential customers. Find out how painful and valuable the problem is. Find out if they are currently using some other solution to the problem (your competitors).
Approach an industry organisation, if there is one, and talk to them about the problem, who has any existing or new solutions and find out if they have market research from their members.
Just a comment about the above two points, you don't have to pitch your specific solution to the problem but I would still leave the door open when you are talking to people and say something like, "if I were to come up with a solution that would do (insert features and benefits) would you be interested in talking further?" If the problem just isn't perceived by your customers to be painful or valuable then I would move on.
Now assuming the pain is sufficient and a solution is valuable then start looking at the economics of the business and start 'building the market.' What I mean by that is start with some assumptions about customer characteristics, for example demographics, and start putting some numbers together in terms of total market size. Try to do this from different angles and use different assumptions.
Then start playing around with what you think your cost and profit structure would look like with different business models. Think about what your cash burn rate will be and what sort of adoption you will need to hit a 'cash neutral' and break even scenario.
Then start applying this to your 'whole of market' model that you did before and start thinking if it makes sense. Do you need 1% or 0.0001% of the market to start adopting your solution? What might it cost to acquire those customers in terms of time and money? Start thinking about how that relates to hitting your 'cash neutral' and break even scenario.
Take a step back. Does this make sense? How much work is involved? How much capital are you going to need to achieve this? Then multiply that by say 4-5 times to give you a margin for error.
Now start thinking about post 'cash neutral' scenarios where you are capturing different rates of the market. How much do your costs ramp up? What is your marginal profitability? What does this equate to in terms of return on capital? If the returns are low then forget it. Investors want you to return their capital plus a big fat profit. If you don't think you can grow a big enough pie so you can get a slice of it that will satisfy you then forget it and find another opportunity.
If things look like they are stacking up well and you got a good story to sell to investors then good luck. Raising money is a bitch. Assuming you manage to get enough then things get harder because you will now have to execute within the cash 'runway' you have been given and well the rest at that point is up to you, your team and luck.
Even those who form a team and raise money are doing this. It's not just the bootstrappers. For instance, I can name 3-4 people in my admittedly tiny sphere who had an idea, raised significant amounts of money, built a product, promptly failed, then pivoted multiple times before running out of cash.
It's as if starting a business has become so easy, that it's easier to just do it and see what happens rather than invest any kind of time and effort in researching the market first. This shoot-first-ask-questions-later attitude is spurred along by stories of huge multi-billion-dollar companies being born out of half-assed "so what now?" pivots. (See Twitter.)
In my experience, it's ok to do this once or twice because in your first at-bat, you don't know what you're doing anyway, so stopping to assess a market is just a waste of time. Put a year or two into something, get a feel for how it's done, and if you don't turn into Mark Zuckerberg (home run on first shot), you'll be better prepared to assess the validity of future projects. (That said, the best of my 4 businesses was the first, so there are exceptions.)
While I admire his entrepreneurial spirit, the author of this article (and his partners?) seem to have taken the "shoot first" philosophy a bit too far. 10 startups in 7 years seems extreme to me. The optics of it, from a potential investor's perspective, seem negative, too.