

Ask HN: Why don't freelance hackers and development companies create startups? - mfieldhouse

They have the skills and a good idea of what people are prepared to pay for so why do they continue to build bespoke software instead of creating a startup?
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rwhitman
Here are several reasons, from experience -

1) Consultants live off of short term payouts. Its a challenging business leap
to go from getting paid lump sums now to building something essentially on
spec and hoping for a payout later.

2) When you are a consultant, your time is typically tied to billable hours.
It becomes extremely difficult to sacrifice billable hours in the short term
with hopes for it performing well in the future.

3) Taking resources away from clients to work on an internal project narrows
the bandwidth you have for taking on more clients.

4) Consulting work typically is linear - in that you build once, to the
client's spec, release it and then move on to the next project. Its rare to be
in it for the long haul, improving on different iterations and monitoring
performance. This is a big mental gap when building a product - its not just a
single launch and done like a client project. Its a long term process
nurturing and iterating until the product is successful. We consultants just
don't have enough experience in this, and have become pretty hardwired to
projects being "done" and instant payouts at launch time. Personally, I've
struggled with this a lot in the past and am still learning how to break free
of this "one and done" mentality.

So basically thats why consultants who make successful products are an
exceptional and special breed.

~~~
mgkimsal
Interesting angle, as I'm probably the opposite on the 'done' aspect for
client work. I mean, at some point, I stop, but usually want to keep iterating
on things for the client when they simply don't want to. They don't have the
bandwidth for continual iteration - they need something that works for needs
X, Y and Z. Once it meets those needs, they're 'done' (and usually 'done' with
me too). I struggle to _not_ keep working on something, iterating, etc beyond
what the initial specs were.

I'm working with a couple clients where it's an interesting mix - we're
iterating the product to meet evolving needs, and discovering some of those
needs as we go along, but many projects aren't like that.

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mgkimsal
Some people may simply enjoy the process of development moreso than the
process of building a business.

I've been at this crossroads for a a while now, and as a local startup guy in
the area has posited, "consulting is like crack". From a financial standpoint,
it's pretty hard to give up - even moreso if you're not really passionately on
fire for _one_ idea, which I do think you really _need_ to be to focus on that
one idea/service/product for a long time (years).

Additionally, just because you've got an idea about what people are willing to
pay for because you've done consulting for some clients, doesn't mean that you
_can_ (easily). Much of what you've learned working for, say, 3 clients, may
need to be validated with a larger group. The few clients you worked with may
have extremely focused needs, and what you've built for them has limited value
outside of those handful of orgs. _Finding_ the other orgs that could also
benefit from a similar service/product may simply be too much work (and it's
not guaranteed to find anyone at all).

On top of that, some of what you've built may have been predicated on
confidential information/processes which you can't replicate. You can often
whiteroom something, but again, is it worth it?

It may surprise you, but many companies are willing to pay a _lot_ of money
for a solution that ties in with existing systems and matches their business
process 100%, rather than use a genericized system which they'd have to adapt
to (and which some of their competition might be using as well).

In my case, I've not yet found an idea that I'm really passionate about
pursuing as a full-time venture. Until that time comes, I consult (and do
things like indieconf.com - conference for freelancers like myself!), getting
to the point where, should an idea strike me, I can self-fund the venture if
need be.

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rfugger
Consulting is a job. You have one or a couple clients, and you only have to
satisfy them to get paid. You can work during the day, relax at night, take
vacations, and generally let work come to you, since there is massive demand
beyond supply for your services.

A startup is your whole life. Your job isn't just to satisfy a couple focused
business people, but generally thousands or millions of fickle consumers.
There is a high probability you won't ever be paid for your work, and if you
are paid, it is often way more than you actually need.

~~~
mattdeboard
> There is a high probability you won't ever be paid for your work, and if you
> are paid, it is often way more than you actually need.

Way less you mean? Getting paid way more than you actually need is the part of
why people start a business isn't it? :P

~~~
alecbenzer
I think he did mean "more". If you could choose between being more or less
guaranteed a certain amount of pay, why take the risk of working and
potentially getting nothing out of it? The answer might be because if you do
succeed, the returns are much higher, but if you don't care about the higher
returns, then you're taking the risk for no reason.

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dmix
1) They'd have to quit consulting to be a real startup. It takes a fulltime
effort. Otherwise its just a small business.

Most software devs get paid quite a bit to consult, so they'd be taking a huge
pay cut.

A lot of people don't like that risk.

2) Most dev shops I know have side projects they release as products

3) Mostly importantly, building products is _really_ hard to do well. To make
any significant amount of money from them is even harder, which makes those
dev contracts look so much easier and accessible.

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dalke
Some of my consulting work integrates different packages - commercial,
academic, and in-house - into a single system. It also needs to understand the
local database configuration, the cluster queuing system, the shared
filesystem, and other customer-specific configurations.

I have a framework for this project. It takes about a week to write. The other
year of work I did for one client were the modules and components to fit their
internal requirements. This included porting some of their software from IRIX
to Linux. Overall, only a relatively small amount of that development could be
shared with another client.

I thought about spinning that part off as a product. I haven't been able to
make a viable business plan out of it. The type of people who could build
their own components for my framework is the same as the one who could build
the framework in the first place - and indeed, other companies have in-house
frameworks for the same thing. And while I think mine is better, it's biased
towards Python but this sort of software tends to be written by IT staff more
interested in C# or Java.

Also, I like working close to the end-users, with frequent iterations to get
what they want. Selling software (I work in chemistry, where it's hard to
develop web-based apps due to the proprietary nature of the end-user's
chemical structures) is one step removed from the users, so I don't have the
same feeling of connection.

When consulting it's easier to know that work = income = profit. With a
startup or product development, you spend a lot more effort to develop a
product before knowing that you'll make profit.

------
zacharytamas
I'm almost twenty-three years old with schooling for Computer Science and
Business doing freelance full-stack engineering work primarily for the
flexibility (fiancée has a few years of school left so I'm delaying "settling
in" because there are no interesting tech companies around her University),
and I would love to start a startup.

However, as some other posters have said, a big burden is the regular pay.
Freelance work pays now when I need the money, verses startup work being, in a
lot of cases, basically an "option" to be paid later...maybe. I'm working on a
pretty ambitious start-up idea in spare time but unfortunately I can't afford
at the moment to focus my entire work life on it. Ideally I would try to
bootstrap it but other expenses ( _cough_ student loans _cough_ ) take some
precedence.

It really is a frustrating position to be in.

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garethsprice
Perhaps the question should be why do people who could be billing their time
to enterprises for $100+/hr or on 6-figure salaries spend years of their life
trying to build a startup that has a very small chance of becoming profitable.
Consulting or even full-time employment is debatably a more economically
rational choice.

Thankfully, people are not rational economic actors so there's a healthy
ecosystem where talented hackers are basically free to work on whatever they
like. Here's to the freedom of being able to do what we love, whatever that
may be.

I personally like consulting work as it's very low overhead, get to meet lots
of smart/interesting clients, high cashflow, exposure to lots of exciting new
projects. I even enjoy the hustling and pitching part of the business. I'd
like to build a successful product one day (as most consultants do) but it's
hard to find an idea I care about enough to dedicate years of my life to,
especially when I have a steady stream of consulting work that pays well and
satisfies my need to create.

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thegoodlab
Most do.

37Signals, Pivotal, Zurb are great examples of companies who have transitioned
from client based to product, or are currently doing both.

I'm a freelance developer and based on my situation and those of my peers,
everyone is working on side projects. The reason I choose to consult and have
clients is because it lets me be my own boss and create a business doing other
people's (clients) work. I can craft and hone my skills doing client work,
while always brainstorming an idea or product to launch in my spare time. When
the moment strikes I will already have all the resources and knowledge
available to make a great stab at the startup scene.

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chris_dcosta
My guess is that some freelance hackers do indeed create startups, just not
the majority of them.

Regarding development companies, well you'd have to ask yourself why the owner
who has already spent time going through the pains of starting up, want to
throw away a working business in favour of one that may or may not work.

The owner could encourage side projects if so minded, but it's more likely
once their business is running, that they have too much to worry about running
one business to have time to think about creating another.

Either that or they have lost interest once the dough starts coming in!

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jv22222
Many do! 37 Signals, Magento, and also our agency Company 52 (responsible for
Pluggio and TinyGrab) being some examples.

~~~
mixonic
Harvest, Balance Media, Disrupto, Pivotal (I know 6 months ago they were
starting to get serious about Tracker as a product), and that's only off the
top of my head. I think turning to product dev is a pretty common aspiration
for consulting companies.

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calciphus
I think as many folks have said, building real products and startups is a risk
- the kind of risk that most freelancers tend to avoid. Freelancing and not
knowing where your paycheck for the next 6 months is coming from is risk
enough.

That said, any development company who wants their revenues to outpace their
ability to hire new employees is going to be investing some measure of their
talent, resources, and insight into new products. Pivotal, 37signals, etc,
etc, etc.

I work for a company called ELC (<http://elctech.com>). Over the years we've
been in business have started RightCart (bought by Buy.com), RightSignature
(online doc signing) and RightScale (cloud management company). All of these
began as internal tools or projets and were spun off into fully functional
companies, taking some of our developers with them.

For us, spinning off these companies makes for a great investment and when
they succeed, a big feather in our cap. But the fact is, the internal
structure of a startup (at least any successful one) is worlds different from
a professional services group, and spinning them off is necessary for their
success. Times we've tried to do the startup entirely within our organization
has been considerably less successful.

------
phamilton
As a freelance developer you don't have to build things that are profitable.
You just need to build something for someone with money that they think will
be profitable. I don't know how many stupid products I've built that I don't
personally find to be profitable.

It's easy to find many products that are wanted by only one person. Therefore,
consulting is easy. Building a startup is about finding one product that many
people want, which is much more difficult.

------
dylanhassinger
Typically, wife/kids. Also, mortgage/car payment.

------
alinajaf
Can you give me an example of a development company or freelancer that _isn't_
working on their own products in some capacity?

~~~
geoffw8
This is a really short-sighted view, there are literally thousands (if not
more) of freelancers and development companies who have no wish to work on
their own products. It just isn't in some peoples mindsets. They literally
just don't care.

Just because in our dimension every development agency, or freelancer writes a
blog doesn't mean they're the only guys who exist.

~~~
alinajaf
> there are literally thousands (if not more)

Like who?

~~~
dalke
Me. I started working for myself in 2000. Certainly I've had ideas for a
product, and a few that I've prototyped, but nothing more than you might
expect from someone trying out a few things at home, away from their actual
job.

(Strictly speaking that's not quite correct. I have released a few open source
"products", but I charge no money for them. My revenue for the last 12 years
is from consulting and training.)

~~~
alinajaf
That qualifies as "in some capacity" as far as I'm concerned.

~~~
dalke
Which, the release of open source projects, or the two weeks of work over 10
years which never went anywhere?

It feels like any number of employees who read HN are in the same category as
freelancers who read HN in having any of a number of, say, github projects and
ideas for products which never go anywhere.

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mvrekic
It takes a while to come to the "product does not suck" stage. People need to
be able to eat and survive during the development stage and there are only
handful of examples of companies that switched successfully from service to
product (Mailchimp, 37 signals and few others come to mind). Starting a
startup/new product requires full time commitment. Part time commitment often
means part time success so for a lot of people it is better to stick to
security they have providing freelance work and services. Just my 2c

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Nikkki
What a coincidence. I had a discussion with the head of a software development
house for start-ups on this weekend. He strictly said no to such a proposal
because they have had a only failures trying to build products. I think it
takes a lot of commitment and full focus to really build a successful product
than just moonlightining on an idea.

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marquis
I see hybrids of this a lot and, as dalke points out, consulting is an
important part of having a solid income while working to spin off in-house
tools or new ideas - much like we see developers here offering consulting
hours while bootstrapping.

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gte910h
People pay 6 figures a year for part time work doing hard tech things. That's
a comfortable, easy living with interesting work and people.

Additionally, I've helped make several OTHER people's start-ups, I'm just not
a real employee.

------
gexla
Freelancing / development companies are businesses. A developer just getting
started as a freelancer _is_ a startup. Try taking a serious run at two
startups at the same time. It's hard, and I think that's your answer.

------
knodi
Creating a startup is not easy and you have to slave your self over for the
first year or two easy and if it all fails then you just lost a lot of your
time/money investment.

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AznHisoka
Many have the best of both worlds: a small team environment with freedom, and
the ability to pay the bills right now.

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Mz
An awful lot of startups fail. Some people don't want to break new ground or
change the world or whatever and certainly don't want the exposure to risk
that is involved. They just want to pay their bills. There is nothing really
wrong with seeking an honest day's pay for an honest day's labor.

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eriksank
I see two reasons: (1) A very small proportion of the applications ever built,
constitute ballgame-changing breakthroughs. The other applications could still
make some money, but not much. (2) The closer to the client, the bigger the
slice in the value chain. A client may pay 5000 USD for small modifications --
often only applicable to his own setup -- to a program that may only have cost
100 USD to buy in the first place or that he even downloaded free of charge.
In other words, for lots of developers, it makes economically more sense to
customize a ball-game changing application for a client rather than to spend
their time trying to push self-created but actually mediocre applications.

