Funding

Probably no more dangerous than Funding by Plastic and probably a lot more fun:

Meador, who is head of operations at ClearContext, and Deva Hazarika, the chief executive officer, have been playing poker in lieu of collecting paychecks for the past year while working to get their three-person company off the ground. After logging 50 or more hours a week at the office, each one spends another 10 to 15 hours, usually on weekends and evenings, at their favorite poker sites—mainly Partypoker.com, Ultimatebet.com and Pokerstars. CNet: High-stakes start-ups

Please don’t do this though unless you know what you’re doing. (That was just my don’t sue me for posting this disclaimer.) If you try it let us know how it goes.

It reminds me of a time when I was so low on cash that I was paying my annual domain name fees “investing” my meager E-Gold account balance on Blackjack at The Gold Casino .

One good thing that semi educated gambling can teach you though is to make calculated bets . This is the same for startups. If you bet all your money/resources in one go you are making a huge bet with a tiny chance of winning.

Joe Kraus says It’s a great time to be an entrepreneur

In this post he asks why it cost $3m to launch Excite and only $100k to launch JotSpot

His conclusion is that it boils down to the following 4 things:

• Hardware is 100X cheaper
• Infrastructure software is free
• Access to Global Labor Markets
• Search Engine Marketing changes everything

I agree with these, but would also like to add these to the equation:

• Simpler services are more successful
• Big is no longer cool
• Better frameworks

Simpler services are more successful

Most new successful services are very simple in reality. Just look at Flickr, Del.icio.us and Backpack. They are all intentionally simple services that do one thing and do it well.

This allows you to focus your development and sales efforts and you need less focus on the foolishnes that I remember was rampant when I was at AltaVista during 1996.

Big is no longer cool

Burn rate used to be cool. Founders of startups used to blag about their monthly increase in staff size (read burn rate). There is no need for this and most people have got the gospel. Most people sucn has 37Signals are infact bragging about how much they can get done on a team of 4 people.

This wanting to be big is actually also one of my Bootstrapping Anti Patterns

Better frameworks

It is a lot easier and quicker now to bring a new service from concept to launch. One of the biggest things helping this is the emergence of new practical web frameworks like Ruby on Rails . This allows single person or tiny teams to incredible things in very short time.

Just look at the Real World Usage in Rails page to see what has happened in less than a year of Rails.

There are other similar frameworks where you could do similar things quickly, but really Rails is one of those economy changing tools that is and will cause a lot of turmoil in the world of web applications.

Conclusion

Joe says that there will be a lot more companies founded on $100k. This is true, but there will be even more self funded bootstrapping startups out there competing with their angel funded breathren.

Seth Godin has as good and short a description I’ve seen of the curves of product sales. The four curves of want and get

Basically curve A is what everyone wants but rarely gets, Curve B shows a spurt of early adopters then hardly anyone else. Curve C shows the most realistic success curve which we should generally speaking plan our finances around and finally curve D which is essentially the failure curve.

These things are very important for us bootstrappers as we we need to be able to plan our funding/finance accordingly. I think it is best to plan for C. Obviously if you plan for D, why start at all. This is why it is so bad to fund with your credit card, because unless you hit curve A, the credit card will kill you before success hits in curve C.

Curve B is interesting. Seth talks about this as what happens if you a fan group who all buy your stuff immediately. Then no one else does.

We’ve all heard the stories in colourful business magazines about people starting their multimillion dollar companies using nothing more than their credit cards as funding.

It sounds like a cool idea and all and it could probably be used as a gamble if you are betting on receiving a large amount of cashflow straight away. However the monthly burn rate you will have if you dont have oodles of cashflow straight away is one of those things to remove the focus of the business that I just can not recommend.

My mantra is as always focus on the business. Having an extra $1000 more burnrate monthly as you might get if you hit the cards, makes it so much more difficult to hit break even. This means you start worrying about money and not on building your business.

It’s a very similar anti pattern to the perpetual business plan anti pattern. It is always easier to survive or seek funding if your business is going albeit small. But it is almost impossible to do either no matter how good your business plan if you don’t focus on your business.

During the Reboot 7 conference one of the most interesting sessions was Jason Fried from 37Signals titled “Doing big things with small teams”.

It is the story how they have managed to roll out:

• Basecamp
• Tada-list
• Backpack

Using very few resources and quickly. It was basically a tale of bootstrapping successfull commercial web services.

Much of what he said runs along the same thread that I have been pushing here. In fact there was really very little I would be in disagreement with.

The main things that where enlightening for me was their tech support strategy. Jason does most of the techsupport for all of their sites himself. If someone has a suggestion he replies back to them thanking them for the idea and immediately deletes the mail. If enough people suggest a feature it will be memorable enough that it will make it on the todo list.

He also stressed the importance of leaving applications as simple as possible, allowing people to structure things their own way and not imposing structures upon them.

Several people asked him if they didn’t want to grow bigger. He replied that currently that would not be a priority for them as that would take the enjoyment out of it. I am absolutely in violent agreement with this.

The reboot participang notes from Jason’s session