

The 2013 Startup - philtoronto
http://nickchirls.com/the-2013-startup

======
josscrowcroft
I'm stoked to read these opening phrases:

 _"...The founding team is very small, often one technical person. In some
cases ... hacking something together because she needs this thing to exist ...
They are slowly and deliberately building small communities or early
customers. Some are even making money. In fact, a few of these startups are
profitable (in the ramen sense)."_

...because they read exactly like a case-study for what I've been experiencing
with my project[0] over the past 12 months, and have found very hard to
explain to people.

It's really nice to have a rosy outlook beyond "Hey that's neat, now you can
go do a _real_ startup!"

[0] Open Exchange Rates (<https://openexchangerates.org>)

~~~
corford
Another "2013 start up" guy here on the march towards a first public release
and it really does read like a case-study. He's beautifully articulated the
philosophy I've adopted to get from light bulb moment to something real and
the resulting experiences over the last year.

Also, congrats on openexchangerates.org ! Idea's great and deliciously simple,
the site is lovely and the API looks snappy and clean. By sheer serendipity my
project has a major requirement for exchange rate data so I'll be getting my
hands dirty with your API now I know you exist :)

~~~
gfodor
_raises hand_ me too. I'm way too honest to call what I'm doing "a startup."
But I am spending my own money on it, and I am working on it exclusively.

The article makes the point but it should be re-emphasized: the tools a
capable individual has at their disposal now to build software is, for lack of
a better way to describe it, completely insane. I'm revisiting AWS's offerings
as a solo person now after working for a larger company for a few years and
it's mindblowing what's there. And then there's stuff like github, mixpanel,
new relic, and so on, all of which offer starting tiers that are free or
absurdly cheap. I can buy tools to do design work in the App Store today for
tens of dollars which just a few short years ago would have required a sales
call and a 4-figure purchase order.

Having done a "real startup" three years ago I look around now and realize a
lot of the hard operational stuff I was wrangling with back then has basically
been commoditized and can be paid for as a service that scales linearly up
with profits. It's nuts.

My focus is this: take advantage of this massive leverage to get as many
experiments going as fast as I can. Invest the time to build _domain specific_
components (not devops crap that I can now pay for) so that I can quickly
create a series of products/experiments around a similar theme quickly while I
try to find something that clicks. Keep costs low and charge for the product,
keeping a close eye on operating margins. (People paying for something is the
strongest signal that you've found something interesting, after all.)

------
lackiem
We have been doing this for years and have bootstrapped all of our B2B
startups (SaaS products). We have had VC's contact us and turn them away
because it is not a good fit. We haven't fallen within the "ramen sense"
profitability in a very long time and are comfortably profitable with
employees. We simply keep re-investing profits from successful products into
new products and over the years have been able to acquire hundreds of
thousands of users. We are at a point where we are able to leverage our
current user database for new product launches, feedback and ideas.
Bootstrapping forces us to think about profits and launch products that our
existing customers and new users will pay for. It gives us no choice. I would
like to see more tech startups consider bootstrapping. I think too many read
Techcrunch and hear about the very few that make or have been acquired for
millions and have VC backing but don't look at the thousands that die off. I
have always looked at it as wanting to build and grow a successful business
that is around for a long time.

~~~
mindcrime
We're doing the bootstrapped / self-funded approach as well. It is frustrating
sometimes, to look around at some of the opportunities that we can't pursue
due to lack of resources, but so far I don't see a big need to go and jump on
the "institutional capital merry go round".

On a somewhat ironic note, however, we recently applied for an NC IDEA
grant[1], and didn't get accepted... one of the reasons cited in the feedback
letter was something like "concerned about the commitment of the founders as
they have only invested ~$5,000 to date". Um, hello... we hadn't _needed_ more
cash up to that point. It's just the two of us sitting in our homes, or coffee
shops, writing code on our laptops. All the expenses we have had so far were
basically: 4 Slicehost slices for various purposes (a demo server, our wiki,
SugarCRM, website, etc.), a paid Github account for code, and a little bit of
printing and random stuff.

So, somehow, the fact that we've run lean and been very capital efficient so
far, is seen as a negative. I don't know whether to laugh or cry.

[1]: <http://www.ncidea.org/content/grant+program/956>

~~~
mdda
Perhaps you should modify the way you're accounting for your cashflow : Show
that all the P&L gets dividended out, and that you then put it all back in the
business. That way will show far more than $5,000 commitment on your parts.
(They don't have to be literal dividends, just internal allocations to the
partners, and an internal reinvestment).

~~~
lackiem
Yes! Great advice!

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yesimahuman
This is my company Drifty (<http://drifty.co/>). We make make HTML5 dev tools
Codiqa and Jetstrap.

In 2012 my best friend and I bootstrapped the company while working full time
(we just charged for our products). We made enough to go full time later that
year and we employ one person and are hiring more.

We are actually in TechStars right now (score one for great value-add seed
investors), but we are saying "no" to extra money beyond that. Why? We think
bootstrapping it fits who we are and what we want this company to become.

Does that mean we are a "lifestyle" business? I don't see it that way. We are
still insanely motivated and have high aspirations for this company, but we
don't think throwing tons of cash in it will have the best result for us, our
happiness, our customers, or our long-term sustainability.

We go back and forth every day about raising, but we have a lot of support not
to right now, so we'll see what happens.

~~~
thisisrobv
Great to see you and other companies head in this direction. If you have
revenue early enough it's a game changer. Glad TechStars is supporting you in
this decision.

------
LyndsySimon
My limited experience says this is right on.

One of my best friends has been working on a startup for about two years now,
focused on a B2B vertical where he has experience. It's gone well, and he's
gained a handful of customers who are all very loyal to his product.

He's turned down outside investment the whole time, because he didn't have a
growth strategy that required capital. He saw investment as a liability,
taking a portion of his flexibility and tying him to a strategy he hadn't yet
tested.

Now, he's looking for funding to grow quickly, and to hire some marketing
folk. Ironically, while he had people asking to invest a few months ago, now
he's having trouble finding the right fit. He's heard "you're just a little
bigger than the companies we normally deal with" from every corner.

I know he's not alone in this. I hope the startup world quickly adapts to this
change, and develops a facility to deal with tiny bootstrapped companies that
are past the "I have an idea!" stage, but need outside expertise and a
workable plan to scale.

~~~
mdda
Another viewpoint : The investors that had previously wanted to invest are
used to being the ones with the upper hand. Now he has a lot more negotiating
power, and that doesn't suit them _at all_. And that should be a lesson for
people that raise money early too.

------
spo81rty
I bootstrapped my first company the whole way and sitting here today wouldn't
have changed it. It forced us to be smarter and work harder. We also had more
time to figure it all out with little pressure.

Now the second time around (Stackify) it is nice to be self funded. But its
easy to spend money on things that aren't always necessary. Definitely not
optimizing the cash as much.

As an angel investor I prefer smaller companies who slowly figure it out and
get some traction before raising money. So many people raise money to
experiment if it will even work.

------
jasonhamiltonm
Very interesting. I feel that I'm part of this cohort (unexpectantly) since
recently launching startuprocketlauncher.com in 2013 ... essentially starting
making $$ after day 2 and receiving tons of signups from little marketing
efforts. I'm not necessarily say NO to investors but since I can market,
develop and acquire users myself with a bit of profit, I prefer to work at a
pace I'm comfortable with. Its best I believe to experiment without any
pressure and development the business model creatively to a point where, if
needed, investors can jump onboard with something less risky with a thriving
community to take it to the next level.

------
pshin45
Anyone else get the sense that this article is, intentionally or not, a huge
ringing endorsement of the YC model?

I.e. much more focus on providing super early-stage startups with guidance,
emotional support, and the world's best network while providing the bare
minimum of capital up front (avg $17,000) to keep founders lean and mean.

My only gripe with YC is that despite how successful they've been and how many
copycats they've inspired, there is still a huge drop-off in quality outside
of YC, and yet pg and friends seem to have no plans whatsoever for any kind of
domestic or international expansion, which is a shame.

~~~
yesimahuman
I don't look at it that way. It seems YC is interested in pushing early seed
stage companies to raise a big next round and become a "large, venture-backed
company" (from our interview rejection earlier this spring).

This "2013 startup" is something different: focus on customers and revenue
instead of just raw users, and go from there. At least that's my
interpretation of the concept.

~~~
nchirls
I'd agree with this. YC is a wonderful program for both startups and
entrepreneurs, PG is a godsend for these groups, especially in past years when
seed funding was harder to come by. However, a lot of the hype now around YC
often pushes entrepreneurs to raise way larger seed rounds than they need or
know what to do with. This is of course not always the case, and I can think
of several YC companies off the top of my head that did not go this route
(even when there was investor demand for it), but on balance, YC seems to
encourage founders to raise way more capital than these companies need in the
early stages. Again, I think entrepreneurs are now waking up to some of the
negative consequences that can result.

------
zmitri
I hope this is the case.

Any founders feel they fit this bill in NYC? If so, would like to meet with
you and talk shop. We're almost at 60K users on a "project".

Email is dmitri [at] backspac.es

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dataisfun
How do you define seed investor here? Most people need some sort of startup
capital beyond the accelerator, as most companies don't get to profitability
quickly enough. Also, I think this ignores B2B cases where you can't so easily
build a highly stripped down product, but need to hit some quality threshold
for businesses to pay. And that takes time.

~~~
nchirls
Indeed, I'm defining seed investor largely in the context of a "seed
round"...which these days seems to be anywhere btwn 500k - 1.2M. There are
some 2013 startups that take a bit of friends and family money to pay for rent
/ food, and this largely comes down to the founder's personal / financial
situation. Also yes, many of the cases I'm thinking of here are consumer
focused companies.

------
jtchang
That kudos thing is so much fun.

------
colinsidoti
For the sake of argument, how is this different from self funding? Ramen
profitable isn't profitable, and not taking seed is just preventing you from
paying yourself.

~~~
soneca
As i see it, it is self funding. And the "no" is actually a "not yet". As the
author puts it, is a problem to seed investors, because now the founders
themselves have the money to their own seed. And nothing has changed to VC
capital.

I don't see it as a "2013 trend", it is something that only depends if the
founder have a cash reserve or not. I don't think there were many founders
seeking seed capital in the past out of absolute need. Not in the past, not
now. Maybe these days we have more people saving money with the clear purpose
of self-fund for a year or two. Maybe is anedoctal.

~~~
nchirls
Yes, the point is that in most cases, at some point these companies will raise
institutional VC. But whereas in the past couple years, I've seen founders
blindly take seed capital (in some cases very large amounts) because the
market offered it, I see founders now thinking more thoughtfully on sizing and
whether to take it at all until they can show real growth. Once they can show
that, they can make a better and more educated decision to hop on the VC
treadmill or not. Mainly the point is that I'm seeing more mature founders
question the funding environment and realize some of the negative implications
of overfunding at the seed stage...

------
gabhubert
like the point of view. Will be interesting to see if some prominent founders
say "no" like some said no to large but not large enough acquisitions in the
past.

