Funding

Shawn continues on where I started and asks Are business plans really evil?.

He’s got some great links to various resources about why traditional business plans aren’t necessarily the best way to go.

For those of you who haven’t yet heard of FON, they are a very cool Spanish WIFI startup, who aim to make their Wifi network ubiquitous throughout the world. So how have they taken up the challenge of the worlds telecoms companies?

Well they’ve created what they call a social router. This is basically a Wifi Access point with two completely separate SSID’s – one public and one private. The one above is mine. If you hurry up you can get one as well for 5 euro or US$5. This offer ends on the November 8th after which you will be able to get them for $29. Martin says the cost of each router is $28. They say that they have 20,000 routers connected.

I’m not sure how many they have actually sold, but assuming they have sold 20,000 routers that means the direct costs for the routers have been at least $460,000, not including development and marketing costs. I think this is a fantastic sales strategy and one that could only be done with VC funds.

This is similar to the $10 gift certificates that helped grow PayPal like crazy during their first year. This was also a very good use of venture money.

They also show that there are definitely uses for Venture Capital. I still believe though that until you reach the point where you have great plan like this, it would be best to stick to bootstrapping or angel funding.

Ryan has now followed up on his great talk at Future of Web Apps with a couple of blog entries at Signal vs Noise. Read them here:

• The Cost of Bootstrapping Your App: The Figures Behind DropSend
• The Cost of Bootstrapping Your App: The Figures Behind DropSend

Over the past few days I have been listening to the podcast version of The Future of Web Apps conference, which was held in February. All the talks so far have been very interesting, but the most interesting by far for a bootstrapper like me was Ryan Carson’s talk about how he built DropSend .

It is a very practical hands on talk about all the costs (with his own real figures) of founding a web based startup. He covers everything from dealing with designers, lawyers, accountants, programmers, hosting etc.

One thing he mentioned was the $1000 he spent on the user agreement. I have saved that for all of my apps including WideWord and WideBlog, by writing my own and writing one that I personally would like to see.

His comment on why the hell did they fork out money on printing letterheads made me laugh as that is one of those silly old school ideas that you most likely wont need as a web startup. It’s a really easy trap to fall into though (as I myself know from personal experience). It’s one of those things that I covered in Bootstrapping a business vs. Playing a business .

Brillant work Ryan and thank you very much for being open about all of this.

Update Ryan has released the slides to the presentation.

Sorry to bore you with more VC related writing. Shel Israel has a chat with Jeff Clavier about Web 2.0 disrupting VC’s .

It is a pretty interesting read even if you haven’t got any plans of going the VC route.

Jeff’s views on what will happen with the current Web 2.0 start-ups is interesting:

A small number of companies will be acquired early before they reach scale or revenues (as opposed to the current fantasy that GEMAYANI will acquire them by the dozen). Another small number will reach profitability and will have their options open, and the majority will either hit the wall or operate small enough that their founders will be able to keep them running alongside their regular day job.

I personally think that there will be a power law kind of situation. Where the A list gets bought up, the B list manage quite fine on their own thank you very much and the C list keep running as a side job.