
The Startup Story I Want To Hear - DanielBMarkham
http://www.whattofix.com/blog/archives/2013/05/the-startup-story-i-want-to-hear.php
======
wensing
I had my idea in October 2004.

In 2006, I quit my job to work on it full-time.

In 2007, my co-founder and I finished the MVP. No one came.

In 2008, we got a big break and it was used by 4 million people.

By 2010, 10,000 companies and 6.5 million people were using it, but we still
weren't profitable.

In 2012, we finally figured out a business model.

This past Thursday, 8.5 _years_ later, I got to show it to Barack Obama in
front of the national press: [http://www.whitehouse.gov/blog/2013/05/10/recap-
big-day-open...](http://www.whitehouse.gov/blog/2013/05/10/recap-big-day-open-
data), and he mentioned it in a speech later that day:
<http://www.youtube.com/watch?v=2glCSMxXIF8#t=11m7s>

We're on the verge of several deals that could take us to profitability with a
headcount of 6.

It's been an insanely difficult road. I think there are many reasons for that,
but here's the chronicle:

[http://wensing.tumblr.com/post/1215873671/bootstrapping-
stor...](http://wensing.tumblr.com/post/1215873671/bootstrapping-stormpulse)

[http://wensing.tumblr.com/post/26830276239/bootstrapping-
sto...](http://wensing.tumblr.com/post/26830276239/bootstrapping-stormpulse-
part-2)

Part 3 should be out soon. :)

~~~
tudorconstantin
Congratulations guys...both articles are inspiring - i just couldn't do
anything but read every words in them I don't think I'd had the nerves to get
through all that struggle

------
dvt
> No business porn for me. I want struggle, not Disney.

+1. Even though @jstanley is correct about the latter quote, I do agree that
most start-up stories are dominated by these fantastical circumstances and
ridiculous buyouts. I think there are primarily two reasons for this:

1\. Retention (or lack thereof) in the start-up world

2\. The success bar

As far as (1) is concerned, I think why we don't hear about people that try,
try, and try some more for many years is that once you reach a certain age or
once you have kids, you can no longer afford to live on Ramen noodles and Ritz
crackers. If you fail once, twice, or three times, it really is very very
difficult to try again. Even tough you've (hopefully) gained some valuable
lessons by failing, you've lost (a perhaps disproportionate amount of)
resilience. Thus, you're much less likely to try again.

(2) is moreso culture-dominated than rooted in the real world. As far as I'm
concerned, I'd consider myself "successful" if I launched a 1-person start-up
and sold it for mid-to-high 5-figures. That's not even close to "Facebook
successful" and maybe my success bar has been lowered since I've failed a
bunch of times, but most of these books/interviews/talks are written/given by
people that have had outstanding exits. No one wants to talk to the tiny 2-man
studio that built a company and sold it for $300k (even though I would argue
that's a successful exit).

------
graycat
In the US, just pick a town, any town, tiny to huge, and walk down its Main
Street. There you will see just what you are asking for except mostly the
businesses are not in information technology, Web 2.0, mobile apps, etc.
Instead the businesses are dentists, pizza shops, Chinese carryout, franchised
fast food, auto repair, auto body repair, lawn services, plant nurseries,
boutique retailing, kitchen and bath remodeling, roofing, driveway
installation, other construction trades, CPAs, general practice lawyers, auto
dealers, bakeries -- get the pattern?

Can look at an information technology startup essentially the same way. A
great example is the Canadian matchmaking site Plenty of Fish -- long just one
person, two old Dell servers, ads just from Google, and $10 million a year in
revenue.

There are some advantages to an information technology startup: First, if
connect a server to the Internet and keep it busy sending Web pages with ads,
then at common ad rates will get the five figures a month in revenue. E.g.,
send two Web pages a second, send an average of four ads per page, get the
charge per 1000 ads displayed (CPM) average of $2.125 in the KPCB Meeker
report, and then get monthly revenue of

    
    
      2.125 * 4 * 2 * 3600 * 24 * 30 / 1000 = 44,064
    

dollars. So, the advantage? Sure: The server stands to be something can plug
together in an afternoon from parts that cost less than $2000 in total. So,
$2000 in capital equipment and $44 K a month in revenue. Darned near a license
to print money and totally blows away everything else, legal or not, on Main
Street.

If the usage keeps growing, fine: Get more servers. Else, the $44 K a month
will do fine for providing for a family.

Moreover, most of the work is just learning the coding skills, e.g., in the
Microsoft world, .NET, ASP.NET, ADO.NET, IIS, system management and
administration. Then if the first Web 2.0 site flops, use the skills to bring
up another one.

But, it might grow, especially if it was carefully planned to from the
beginning to grow. So, then, let it grow.

Any questions?

~~~
wensing
Yes! I have one!

Where do you plan to get your 5 million PV's per month?

~~~
graycat
Well, apparently Plenty of Fish did it!

So, for a first answer to your question, have to 'plan', that is, think of a
Web site that can attract that much traffic, at least from publicity, viral
effects, other network effects, happy users, etc.

How to do that? Well one way is just to think of a 'business idea' (John Doerr
said that business ideas are easy and plentiful; bad business ideas are; maybe
good ones are more difficult and rare!), develop a prototype, use 'lean'
methodology and/or the Steve Blank approach of continually 'iterating' with
the customers and revising the prototype to achieve 'product/market fit',
'pivot' if this doesn't work well, and keep trying.

I have another approach in mind borrowed from project planning examples going
back over 100 years. A joke version is, a good recipe for rabbit stew starts
out, first catch a rabbit! More seriously think of what one venture partner
calls a "big ass" problem. I would add detail: Want a problem that is 'big' in
the sense that we are sure that the first good or a much better solution will
be a very valuable 'must have' and not merely a 'nice to have'. To keep risk
down, want no doubt about this. If there is any doubt, pick another problem.
Another local, mobile, social, sharing app has too much doubt. Similarly for
another 'social graph' recommendation site. From all I can see, mobile
payments also have too much risk from regulations and need for 'critical
mass'; if try this, then be ready to jump quickly on the first good
acquisition offer.

The obvious example of such a "big ass" problem, although not from information
technology, is a safe, effective, inexpensive, patentable one pill cure for
any cancer. Then don't have to worry about 'product/market fit'. Instead, a
sad reality and not at all a joke, have to hire security guards to keep
desperate customers from breaking down the doors to the lab and trying to
steal the pills. Why don't we have such a pill? No one knows how to make one.
But the first person or group that figures out how to make one and patents it
will have a low risk, first good or much better very valuable solution and a
very successful business.

So, right, we are getting a hint: For the success we want, it might help to do
some original research!

So, for step (1), think of a suitable "big ass" problem.

Step(2). For this "big ass" problem, want to find the first good or much
better solution that will clearly be a very valuable 'must have'. For the very
valuable part, in part want a barrier to entry. For a cancer pill, could use
patents. For information technology might use Fred Wilson's "large network of
engaged users" (but apparently now he is moving into mobile payments
instead!), a network effect (everyone uses it because everyone else uses it,
e.g., LinkedIn; nice to have; usually tough to get started), a brand name,
etc. Or have a technological barrier to entry, that is, have a solution too
difficult to duplicate or equal. The common claim that there is nothing new to
permit such is just not true. Uh, the technology might be original and not on
the shelves of the research libraries -- right, that's commonly called
'research' and venture capital won't fund it, evaluate it, review it, or even
think about it and instead will throw it into the bit bucket because their
backgrounds in bizdev, marketing, and selling made them afraid and jealous of
it; also they want always to be "the smartest guys in the room" which raises a
risk of the other guys not being smart enough to make money!

So, to get this solution, do something different for recent information
technology entrepreneurship but nearly standard for much of engineering going
back over 100 years:

For our step (2), faithfully convert the real problem into a mathematical
problem, e.g., as in the applied mathematics in each of most of the fields of
engineering.

E.g., notice that the wings don't fall off Boeing 747 airplanes. Why? A major
part of the reason is the applied mathematics of mechanical engineering.

So, from our step (2), we now have a clearly stated mathematical problem.

Although we are in information technology, notice I didn't say we have a
computer science problem. We're talking applied math, complete with theorems
and proofs and possibly with some advanced pure math prerequisites, common in
engineering going back over 100 years, e.g., to Maxwell's equations, but
recently rare in information technology startups.

Step (3). Get a solid mathematical solution to the mathematical problem. Have
two advantages here: (A) Generally it is relatively easy to check such math
for math correctness. So, get lower project risk. (B) The math approach can
yield solution techniques more powerful and too difficult to think of
otherwise. So, get a better shot at the first good or much better valuable
solution with a technological barrier to entry.

Step (4). Write software to do the data manipulations specified by the
mathematical solution. There are two advantages here: (A) The math really
should provide a precise, usually succinct, specification of what the software
needs to do. E.g., we are not trying to write an 'artificial intelligence'
application based on, say, 'rules' and Forgy's RETE algorithm where have to
keep 'tweaking' the rules until they appear to work, i.e., keep throwing the
software against the wall to see if it appears to stick. We don't have to keep
trying maximum likelihood estimation of 'machine learning' to see if it
appears to stick. Similarly for neural networks. Instead, if the software just
does the data manipulations specified by the prior math, then likely the
software is essentially correct, has done its job. So we lower project risk.
And such software tends to be easier to write than the common, elaborate user
interface software. (B) Such software is relatively easy to check for
correctness because of the fundamental advantage that we have a precise, and
usually succinct, specification of what the software is supposed to do (the
lack of such a specification is the main problem in establishing software
correctness).

Step (5). Deploy the solution. Get publicity. Likely have built into the
problem specification that want a lot of virality.

The steps (2) through (4) typically are challenging and high risk. But there
are two advantages: (A) Typically these steps can be done essentially just on
paper, e.g., as an applied math Ph.D. dissertation or engineering project
planning document. And, as for most applied math research, the work usually
needs just one person. So, the cost, 'burn rate', is low. (B) The work, the
applied math and software, are relatively easy to check for correctness thus
lowering project risk.

If can't get through the fourth step, then return to step (1) and another
problem.

Back to step (1), picking the big ass problem: Here definitely want no doubt.
But 'social' is not well understood so that for highly 'social' applications
we will usually have too much doubt.

More generally this 'way' of doing projects won't work for all projects and
would not have worked for all successful projects in the past. Right. But the
intention that, once step (4) had been completed successfully, the 'way' gives
high financial return at low risk for an appropriate project and enough,
broadly, to get the business progress we have in mind.

So, that's the plan to get the page views!

~~~
morgante
All I get from this is: 1) You can use buzzwords. 2) If I can cure cancer,
I'll be rich.

Great insights there.

~~~
graycat
What "buzzwords"?

You need to read again. What's there is great stuff, far beyond what you
described, that I largely borrowed from the past 100 years of engineering and
technology history.

The bottom line points are: Getting through step (4) is comparatively cheap,
when can do it. So, didn't spend much money. Then in step (5) get to deploy a
solution that has high promise of big financial gains with low risk. That's
not good news?

The 'secret' is that by the time get through step (4), really have something
valuable. So, well before launch or traction, are quite confident will get
major success. That's big, huge stuff.

There are many examples from the past 100 years. Now, note, that after step
(1), steps (2)-(4) are just technical. So, we want to know if my claims for
those steps are supported by history. Well, for an example, at one time the US
wanted to do photo reconnaissance of the USSR. We tried the U-2, but it flew
too low and too slow and got shot down. So, Kelly Johnson proposed an airplane
that would fly at Mach 3+, at 80,000+ feet, for 2000+ miles without refueling,
be relatively difficult to see on radar, and not get shot down. His design and
proposal were essentially just on paper. The project was approved, and he
delivered as promised. So, the lesson is, really can remove nearly all the
technology risk just by work on paper.

Then with the 'big' problem as in my step (1) and solid technical work in my
steps (2)-(4), enter step (5) in really good shape. This is good news. Sorry
you don't see this.

If you want to insist, just insist, against all evidence keep just insisting
that the usual wildly unpredictable, super high risk work of Silicon Valley
venture funded information technology startups is just the best possible with
all the risk necessary and impossible to remove, go ahead.

------
jstanley
"Not buy a boat you can land a helicopter on. Not conquer the world with
iPads. Just make a living."

Not to nitpick, but by looking at startup stories you're not likely to hear
that. That sounds like more of a Small Business story to me.

~~~
tspike
Serious question: is there a community like HN that focuses more on small
scale success a la patio11 and other Microconf types?

I love the tech I see on HN, but I don't relate at all to the obsession with
acquisitions, venture capital, workaholism, and status seeking.

~~~
nandemo
Maybe this?

<http://discuss.joelonsoftware.com/?biz>

~~~
patio11
This is where I cut my teeth on the business of software, actually, but the
forum is a bit less vibrant than it has been in previous years.

~~~
tspike
Do you have any ideas as to why or how to revitalize it? The topics are so
much closer to my interests I'd love to see it get some life again.

------
bdcravens
You said you were at Microconf - Rob Walling's story sounds like that.
Personally I get more out of Startups for the Rest of Us than Mixergy (both
are in my regular rotation). Also did up all the podcasts patio11 has done -
his story is fairly humble. Ditto for Brennan Dunn. Some of these guys are HN
rock stars, but if you dig, you'll find some really good stories there.

------
jaxytee
What about the entrepreneur that launches a startup that makes him/her a
multi-millionare relatively quickly? No helicopters or yachts involved, just a
enough success to live a comfortable middle class life for years to come. Im
sure it isn't always Instagram or bust. At the same time though, is this not a
Startup story? Why don't we hear these?

~~~
tensor
My question is why we focus so much on the personal income of founders.
Someone getting rich is the _least_ important or interesting thing about a
successful company. What matters is the impact on the world.

------
kevinpet
"That eventually combined the right idea with the right execution in the right
market to make a living. Not buy a boat you can land a helicopter on. Not
conquer the world with iPads. Just make a living."

I think I wouldn't call that a successful startup. When someone says "startup"
to me that inherently means the seed of a large business. A software
consulting business isn't a startup in my book. Even Bingo Card Creator,
though it at least has the technological leverage, is in too small a space to
really be a startup.

Selling out early or late doesn't change it, and if they transition from
startup to small-medium sized business somewhere along the way, they could
have been a startup that had a best case failure, but they would cease to be a
start up. I'd worked at one of the latter. A good indicator is when you are
given 65k stock options ... at a penny a share.

~~~
whatusername
But But But.. If patio11 can corner just 1% of the market (Every teachers and
Youth Worker in the world) then Bingo Card Creator will be huge.

I'm sure that's a valid pitch. (And I'm sure the BCC has made more profit that
most companies who pitch something like that)

------
SurfScore
I think this is more a product of selective reporting than it is lack of
reporting. Angry birds was something like Rovio's 52nd game when they were on
the verge of bankruptcy. If you've ever really read into most of these
stories, there's almost no such thing as an overnight success. It is just
reported as an overnight success because _most_ people don't want to hear
about the 51 games Rovio made before Angry Birds. If you have time, I would
encourage you to watch the talk AirBnB founder Brian Chesky gave at Startup
School a couple year ago, and see how long it took them to do anything.

<http://www.youtube.com/watch?v=L03vBkOKTrc>

------
greghinch
It's going to be hard to find stories like that, because startups generally
take investment to move and grow quickly ("Startup = Growth"). When you have a
business that has taken outside investment, you don't have the luxury of
taking your time for years to succeed. Anyone who's started along the path you
want to hear about, as a "startup" defined as I mentioned above, probably
failed. Certainly there's something to learn from those failures, but if you
want to hear successes that took that path (investment for rapid growth, but
ended up going slowly for many years), there are probably almost none.

------
arohner
In August 2008, start working on my startup idea with my best friend who is
also a co-worker at the day job. We work nights and weekends.

April 2009, I quit full time, start working 20 hours a week, and work on the
startup 40-50 hours/week

2009-2011, continue working on startup full time, with occasional part-time
contracting (less than 40 hrs/mo).

March 2011, my cofounder quits, I give up soon afterwards. We had zero
revenue, zero traction, and no plan.

I screw around with a couple of ideas, and try to understand how we wasted the
last 3 years.

I contract some more, realize I can't go back to big corporate life, and start
another startup. This time I decide I'll do something "easy", with a clear
path to revenue. We're going to charge people early. First line of code gets
written in September 2011. We have beta users in December 2011. We turn on
payments in April 2012. We sign up 14 paying customers in the first month.

We grow steadily, and raise $1.5M in December 2012. There are now weeks that
where we add more customers than we did in the first few months. We'd be
profitable if we stopped hiring.

It's been incredibly difficult, stressful and tiring. You need tenacity, but
not too much, as my three-year wander in the desert showed. You need to not
give up in your goal to be successful, but be able to give up on individual
strategies.

You need people to support you, and you need to repay their support. My then
girlfriend, now wife nearly left me several times because early on I didn't
know how to handle the stress, and I didn't know how to unplug and have a nice
night to repay her for putting up with my stress and inattention for the rest
of the week. I don't think I could be successful without her.

My complete failure on the first startup was caused by not having a clear plan
for how the startup was going to succeed. We should have done a better job
identifying who the customer is, how we were going to charge them, and how we
were going to reach them. Additionally, the first startup had large amounts of
technical risk. (It was using some advanced machine learning, when neither of
us started knowing machine learning).

I'd call myself a machine learning expert now, but that definitely wasn't the
case when I started. There's a saying, "in machine learning, you learn, and
the computer doesn't".

The other major failure was that we didn't evaluate our progress, in terms of
business metrics. Each month the product got better, and we understood the
algorithms more, but no progress was made on traction of any kind, or customer
development. You should read Lean Startup before you write a single line of
code in your startup. We should have given up after 3 months, or even a year
of no progress. Instead we wasted 3.

Unless you're curing cancer, all startups have market risk. For first time
entrepreneurs, I'd recommend against things that have both market risk and
technical risk. And if you have technical risk, you'd better be an expert at
it, before you start.

~~~
mtrimpe
> And if you have technical risk, you'd better be an expert at it, before you
> start.

I can't second this one enough. Our startup heavily involved video recording,
which I thought was a solved problem. It turned out not to be at all.

I ended up learning a lot of really cool stuff about Flash's crazy edge case
bugs (I should attach a microphone to a connection with a null hostname to get
the activity levels? Sure. I should wait with attaching a camera until I've
detected a greater than 0 activityLevel? Sure. I should sample connection
speeds and run a regression analysis on that data to find the right
bandwidth/quality settings? Cool, but seriously?) and the various flaws of the
media servers out there (So I don't have access to the packet stream with
Wowza, but in Red5 I need to rewrite the way audio and video packets are
interleaved because when uploading high quality video on slow connections
Flash delays video packets until the end of stream? No problem.)

In the end even though our startup wasn't about video but about interacting
_using_ video, we spent 90% of our time on the video part. That's a lot of
energy I wish I could've spent on building the business instead.

------
AndrewWarner
If, as he says, he wants stories of people who "Just make a living," then
Mixergy isn't the right site for him, and that's fine.

I got into entrepreneurship because I was scared of having a life where I just
made a living. I feel like there's something great inside me. I haven't fully
tapped it, but it's there and I want to learn how to express more of it.

I felt alone for most of my life because most people are like Daniel, they
just want to make a living. I never felt like there was anything wrong with
them. Hell, they're normal. I felt like there was something wrong with ME for
wanting more. For feeling like I can do something extraordinary.

Doing Mixergy interviews reminds me that I'm not odd. Or at least that I'm not
the only one who's odd. My interviewees and my audience are like me. We want
something more. We're learning from each other about how to do it.

Most people reading this can't relate to that. It's fine. Striving to 'Just
make a living' is incredibly honorable and I hope you find the site that tells
those stories.

I hope there's one person out there who gets it. If you're reading this. I'll
see you on Mixergy.

------
alaskamiller
You get the groups that get out of the gate and are just outright lucky. Then
the second groups who figured it out. Then you have the third group that
worked to get there.

Then you have the last group that tried everything and failed to know what
that one thing is that could work.

You just have to wait.

I've been at this for twelve years, since I was in my teens. The struggle
stories takes time to mature for that redemption.

------
MichaelAO
I think this story fits the bill...
[http://wensing.tumblr.com/post/1215873671/bootstrapping-
stor...](http://wensing.tumblr.com/post/1215873671/bootstrapping-stormpulse)

His story culminates in presenting to President Obama this past week @ the
Capital Factory (Austin, TX). Great guy and a story that has definitely
inspired me.

------
duncanwilcox
Dude. You won't hear that story from VCs, they want a 100x exit, and a kid
with his "brilliant" ideas is their best bet at catching media attention.

------
jazzychad
I did the first interview on Mixergy with Andrew about a failed startup:
<http://mixergy.com/etzel-notifo-interview/> \- I discuss my struggles and
lessons learned, but it doesn't have a happy ending like you are looking for.

------
paul_f
A startup differs from a small business in that it is scalable. A restaurant
or a CPA firm is not scalable since you can't grow faster than your headcount.

The author is asking for stories about the long slog of an eventual breakout
success of a scalable startup.

------
tommaxwell
To be honest, most founders dream of big Mark Zuckerberg-like success (who
wouldn't?). Reading stories about who just "make a living" isn't very
promising or exciting, and I think hope is your strongest asset.

------
Mz
That's pretty funny to me. (Sort of sitting here wondering how low you would
want to go and what measure of "success" you would use to decide who to hear
from.)

------
alain94040
If you want to hear that story (x4), attend our "founder stories" panel at the
startup conference in two weeks (May 30, Redwood City). I believe it's at
9:30am.

------
fedor4
Here you are: <http://37signals.com/bootstrapped> Lots of such stories. Highly
recommeneded.

------
orangethirty
Thats my story. Email me. Ill tell you all about it.

------
vishaldpatel
For anyone interested in such a story, I highly recommend Richard Branson's
autobiography - "How I lost my virginity."

------
madaxe
Seven years of slog. A few disastrous false starts, four years living on a
floor in a bundle of rags. A diet of rice and spaghetti, plain.

Always profitable, even through the doldrums. Decent (seven figure) pile of
cash in the company account. Moderate pile of cash in mine.

Still have no idea what to do with it. It's a byproduct of creation.

I suppose this pointless little anecdote intends to shed light on the fact
that we're not all in it for the money, and therefore not all stories are the
same.

Some of us just need to struggle.

~~~
SatvikBeri
I would love to hear a more detailed writeup, or podcast, of the story of your
business. I suspect many other HNers would too.

