>"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business."
How many wonderful niche products would be around if their owners had tried for a small business instead of a 'huge business' with 'hyper growth'?
You need to sell a lot of 10$/month licenses for it to even viable to a 2-3 people startup in a developed country. There is also the cost of opportunity to consider in that.
Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
Customer problem discovery is easier, you get reputation network effects within the vertical, you gain trust because you learn the industry lingo, you can actually solve peoples' problems because you're not balancing needs against unrelated industries, they're willing to pay, and once you get 20 customers you're doing pretty OK.
I’ve successfully done exactly this.
Except in order to get there, we had to spend 3-4 years selling cheap $29/mo self-serve plans at volume to iron out all of the kinks in the product and UX. Only after that were we able to go upmarket selling $40-90k/yr contracts.
It all boils down to the fact that customers paying $20k/yr or more have extremely high expectations across the board. It’s extremely difficult to just pop into a completely new market with a brand new product untested by anyone, and expect large companies to trust and buy from you.
To be clear: It usually makes no sense to develop an internal solution when there is an estabilished offering on the market. If there isn't, embracing an rough and incomplete Saas solution from a startup may work, but:
- You have no control on how the solution will evolve
- You don't own the solution (an internal solution can became a product on itself)
- You don't have any competitive advange (the money you pay are used to develop a product that benefit your competitors as well as you).
> customers paying $20k/yr or more have extremely high expectations across the board.
They definitely do, in certain ways. But also a lot of the software companies use sucks shit. But this part of the other comment cracked me up.
> a medium sized traditional industry that has ancient, crummy software
This is actually how to do it but the thing they're leaving out is that you have to already have knowledge of the specific industry and its players, their niches, and the software they use within them. You have to know where standards are high, and where the current options are bad, and how to market that improvement to the companies that are juuuust flexible enough to switch to your product while being conservative enough not to dump you if exactly one VP leaves.
Once you have all that in place, sure, you can "just" sell your software to them lol.
In most cases, this requires at least one former employee who used the crummy software. Most likely this person would be the one to identify the problem and propose an alternative solution.
Information like this is extremely valuable. It forms the core of the biz opportunity. Casual comments often overlook this.
Builders doing their own thing may not overlap with employees using office horror software 9-5.
(If you feel like you haven’t experienced any problems worth creating a company to fix, consider putting yourself in situations where you’ll be exposed to different/new problem sets)
Anyway we survived but we understand why companies move upmarket over time now haha.
The key is providing a good value proposition. My software would save my customers more than they would spend on it yearly, while outsourcing $50-300k/year in salary worth of work that previously had to be done in internally (usually incorrectly).
You always need to solve an actual business problem that people are willing to pay to fix.
This is the graveyard of engineer driven startups in the enterprise space, who make the mistake of thinking that software quality matters. The fact is it is not a top priority, if it is even a priority at all.
In the enterprise space, if you're not a Fortune 500 company, all that matters is 'relationships', by which I mean sleazy sales processes (or actual nepotistic friends-and-family relationships).
Joel Spolsky wrote a great essay once about why there is no software priced between $1000 and $100,000. Because above $1000 you need a sales team that takes purchasing managers to strip clubs and play golf with CEOs, and that shit adds up. On the plus side, your software can be dogshit, like the stuff you work with every day.
Only engineer and product oriented types think that quality has any actual value. Unfortunately it does not, even less so if your only USP is "quality". If your products only differentiator is that it's technically better than the competitor it really needs to be 100x better in order to sway anyone's interest.
If your maximum work/effort you can put into any project is 100% which you have to allocate into fragments, the product person will put 80% into product development and 20% to marketing but a sales person will put 80% into marketing and 20% into development and unfortunately the latter will product much better results. All it needs to be is "good enough" but reaching to your target market with the right product really is the key.
The unfortunate side effect is that quality is best achieved by having the PR team write it out and put it into a snappy slogan on your product website. Done. Quality achieved.
Edit: And the above applies to your typical non-safety critical Saas, Enterprise, B2B, B2C software. And thinking back to for example the Boeing crashes it likely also applies to the the "safety critical" software/systems as well...
You can get very far with just sales and marketing, but if the quality isn't there, reputationally, that's going to catch up with you over time, same if you have dodgy business practices (i.e.: predatory pricing practices for existing customers, impossible cancellations etc.).
Nitpick, but this is the price range for most professional film restoration software.
The target is often small restoration houses with workstations at 10 or so seats.
What do most managers have access to on their corp card in terms of spend limits, without needing to get VP/finance approval for their purchase?
In my mind, I had the limit as $500/month (potentially from some old readings on the subject).
Corporate approval for a 10k purchase doesn't need to be complicated either. As a software vendor it helps to have a web page/email with all the relevant info intended to be forwarded to accounts payable.
As if that is easy.
50-1,000 person companies aren't actually that big. You can get to know the decision makers and it's not like navigating 20,000 person corporate mazes (also possible if you have the stomach for it).
It does seriously benefit from industry knowledge though. The reason so many people think it's a ridiculous pipedream is because they have no industry experience outside of tech, and that's a big problem -- a solvable one, but most people will never do what it takes to solve it and instead say that it's not possible.
It takes a lot of willingness to do non-tech things though. You can't just set up an online marketing funnel and watch the cash come in. It's relationship driven. The advantage of going after a vertical is that the relationships start feeding each other -- you get social proof within the niche industry. And you don't compete with VC-backed software companies as much because they much prefer horizontal solutions (which can get bigger and achieve bigger exits) versus vertical solutions.
Many of these buyers feel more comfortable meeting you in-person, so going to trade shows, writing articles for niche trade publications, and sometimes doing site visits are all very helpful. So is cold calling.
Sales cycles are often slow. You have to get used to customers taking months to decide, having lots of meetings with different stakeholders, and to get good at telling the difference between those who need a lot of meetings but will likely close versus those who will never do anything. It's a very different game than selling subs online, which I know little about.
The product does need to be decent but I disagree with others that it has to be amazing. Most enterprise software is horrible. They will be delighted if you actually solve their problems (rather than the problems horizontally-oriented software vendors want their customers to have), even if it has some rough edges, as long as you're very customer-focused, responsive, and available.
But it also tends to be durable revenue, because you get tightly integrated into their operations if you do it right.
The one point where gp is wrong is you really can't sell $4k things; $10k min and $25k is better. eg a good to great salesperson closes 25% of deals, so you have the cost of 4 mqls per one close, and then the salesperson gets 20%ish of the deal.
For example, you could try to find 100 customers paying you $500 per month, and do OK with a small team. The alternative, of $10 a month, means you would need 5,000 customers, which could be impossible, depending on the circumstances.
Small businesses focused on bootstrapping should also be aiming for revenue within months, and not 3-5 years. But that's another topic entirely
> People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
Isn't that a better outcome than putting in exactly the same effort but winding up with a totally failed business (i.e. nothing).
I agree and I disagree.
It is hard to bootstrap a product. It's even harder to bootstrap a product that folks want to buy. It's even harder to do that when the prevailing wisdom on this (and other tech sites) is to go the VC-funded route.
The VC funded route -- for the vast, vast, vast majority of software businesses ends up being the exact same as the bootstrapped route -- except that you lose one avenue when you find out your business isn't "hyper-growth" or isn't going to be a huge as you claimed in your pitchdeck to the VCs. You lose the ability to pare back and to be what is described as a "lifestyle business". On failure, the business gets sold or stripped for parts, unless the founder can somehow get the VCs to agree to let them 'buy it back' or write-off their investment and give it back.
Bootstrapping means taking that risk on yourself; but it also means control over your options, and that is one fundamental strength to bootstrapping you don't get with VC funded startups.
Absolutely, it's no salary or the aptly named ramen profitability for a long time if your marketing is not aligned with the folks that will buy your software, or if your software really is just selling a solution to a problem no one actually cares about.
The 'hard part' isn't the engineering. It isn't the technology. The hard part is the marketing -- the connecting the hopefully expensive problem you solve to the right folks who want to buy that solution.
To your second part, I wholly agree that selling $10/month licenses is not a viable way forward if you want to be anything more than a solopreneuer.
But to do that, you need to hone your positioning so that you get in front of the folks with money who need to solve the problem your solution solves.
In your case, it looks like you run a web-auditing tool (according to your bio) called caido.io; and it looks like you're targetting basically everyone who needs to audit a website.
In the thought that "there are more fish in the ocean so why not fish there", that is a seemingly sound idea.
But you don't really want to spend your time trying to fish in the ocean if you have a barrel you could fish in and get the same result... dinner. (I did not come up with this metaphor, that was Jonathan Stark -- who writes a lot about positioning in this context).
The question you have to ask yourself is, are you positioning your product so that the CISOs or the large cyber-security firms would want to buy it? And if you did, do you think they'd trust your product at a mere $25 per month?
Anyway, the point to all this is that the problem is learning how to position the thing you build and get it in front of the right folks, and that's a marketing problem, not a technology problem, and that's something that we as engineers have ignored for far too long collectively.
I wish you the best of luck with your product -- we need more small software businesses in this world!
Depends on the problem. But I don't find a lot of companies that are all marketing and a bare cupboard of an engineering department. They exist, but they are not a universal.Also, most companies that are in this state today have shifted to it from one where product development with the engineering, was actually at least competent.
If you find marketing the hardest part, and most here probably will, you are likely an engineer foremost.
You need a good enough product, and you need it in front of the right buyers. Both aspects can be a significant obstacle to create a business.
Strongly recommend checking urban dictionary before using that in Australia :D or you'll get some amused comments
Urban Dictionary is know for shoehorning any word(s) no matter which into a sexual innuendo, but this the most voted definition, by far. Seems like ejaculation is not such a widespread meaning.
https://www.urbandictionary.com/define.php?term=monthly%20nu...
That means... something different where I come from.
Are you using it to mean "monthly fixed costs"? I haven't come across that meaning before.
I hear it some from business or sales types in the US most often.
You can get funding for that?!
private tax (rent for soil bound property is nothing but a private tax) is the best thing since aristocracy and tithing.
If you only look towards people like Peter Thiel, sure. But the people that cleaned up his mess with SVB aren't so insane.
I suspect the majority of entrepreneurs aren't doing it for the money, they are doing it because they don't fit the traditional corporate mould. The people the media loves to focus on are the outliers.
Schumpeter had some interesting insights on this: https://reactionwheel.net/2019/01/schumpeter-on-strategy.htm...
No matter how comfortable or secure you feel in your job, sudden layoffs can and do happen. Also, what if you develop an illness that makes you unable to work?
Having your company means you can make money while you sleep, you answer to the market (which on average is somewhat "rational") rather than to a (possibly capricious) boss, you get to grapple with a wide range of interesting challenges that take you out of your comfort zone and lead to personal growth, and so on.
As long as you are able to build a company that provides income at least comparable to what you would make at a job, I think the benefits are numerous. It is not for everyone though.
On the flip side, I can't say I'm super sure what "hypergrowth" means, it's a rate of growth but I guess what really Matters is some expected valuation/market cap kinda thing
I guess I'm just trying to gain some career perspective on this heavily bootstrapped startup I'm at thats targeting the alt-thread-mentioned "medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people." and whether it's really worth it for me
This year we made 400k revenue, 150k profit and 40% growth. Our sales prospect are a lot better than at the start of the year. So I'm expecting to have another strong year of growth next year. Also we are nowhere near saturating the market and can have strong growth for many years to come.
Salary + 1/3 of profits is equal to 100k for this year. 40% growth doubles the company every 2 years, If everything goes well just salary + profits will grow very nicely. Then on top of this come the exit opportunities where founders will make millions.
For example, there exist plenty of consultancy companies that have 10million revenue. That would be 20x growth for us. In practice that would mean 500k - 1m yearly income for founders in our case. On top of that the company probably could be sold for 30m - 100m.
With typical vc dilution founders need to grow a very successful product company to earn similar amounts of money. There are plenty of examples of unicorn exits where the founder team has made less.
Nothing wrong with setting out to build a Google instead of a Basecamp. They’re different kinds of company.
If anything it’s easy to underestimate the risk of building a low-risk business. They’re all hard.
Kudos to Konfig!
Sure there is. The probability of success is as good as zero. In all seriousness, a better business model is buying $1000 a month in lottery tickets. You have the same chance of success, you can do it on the side while working your job, and if you do hit the jackpot you don't have to do any additional work. This particular business has no path to being a Google but it might have a shot at being a Basecamp.
Even the Marxist analysis would say it’s about privilege, access, and exploitation. Not “probability”.
Considering well connected people with startup know-how and experience in the Bay Area, I would say they do pretty well with serious startup projects.
No, but that's how anyone should think about startups that are "Google or nothing". Not even Google started that way.
- right product?
- right market segment?
- right marketing?
- right execution?
- right scalability post basic execution?
- right sales approach?
- right post sales approach?
All of these have 10 different paths (in reality), any of which if you take the wrong one could end up in some kind of expensive dead end or spectacular failure.
The reality is that you measure and get information on all of these things to determine more accurately what odds you have. The act of measurement changes the probabilities, because if you do it right you will know more than you did before.
In theory all these things are controllable and no problem is unsolvable. Sometimes it’s even true (post-facto however, more often than not). That view is often the best for succeeding (or more precisely, NOT having that view often puts one at a disadvantage when it comes to succeeding).
But the probabilities are often the more accurate model. That is often the best model for deciding if you want to take a bet, or for comforting yourself later if it doesn’t actually work out perfectly. It really doesn’t help though (most of the time) with actually doing successfully.
American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2–3 years after pivoting three times.
On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
If you told most European startup founders that in 5 years you'll have plateaued at 15-20 employees, a steady income flow, and you'll be paying yourself $200-250k a year, they'd think of that has a big success. In the US they may very well think of that as failure, especially if they are VC funded. I remember hearing a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset and he doesn't want to do business with you.
If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.
There are exception: we need big companies to make GPUs, probably. But it’s not clear to me that this logic applies universally. Some inefficiency is probably going to be good for public wellbeing.
But they're not? Adjusted for inflation, median US household income is 18% higher than fifteen years ago and 32% higher than it was thirty years ago: https://fred.stlouisfed.org/series/MEHOINUSA672N
You could say it was stagnant from 1999 to 2015, though.
You can compute exactly how much by dividing https://fred.stlouisfed.org/series/MEHOINUSA646N by https://fred.stlouisfed.org/series/MSPUS Here's a sheet where I've done this: https://docs.google.com/spreadsheets/d/14NVqsKXnswG27TiwENpi...
But note that some of the change here is people building and buying larger houses as we get richer, which inflation calculations account for and this division does not.
[1] https://ipropertymanagement.com/research/average-rent-by-yea...
If food prices go up, it hurts psychologically but it's not the end of the world. I can buy cheaper food, I can buy less food, I can eat out less. Most people in the developed world are very far from food price-induced famine. I can buy a year's worth of sustenance for a thousand dollars, it might not be healthy but I'm not going to die.
Housing is qualitatively different. Many renters are only a few steps away from homelessness, and more people rent nowadays because they cannot afford to buy. It's hard to adjust for increases in housing costs by buying cheaper housing, your housing is linked to your income.
I complain about but don't ever worry about food prices, yet the roof over my head is a real cause for concern.
For my parents' generation it was the opposite, being overweight was more uncommon, housing was dirt cheap, people worried about getting enough calories rather than too many. Indexing wages to inflation is an anachronism that we have taken into this new world.
I think this is mostly not true? You can adjust for housing becoming more expensive by changing your consumption patterns, just as you describe with food. It's still rough, but unless your family is living in single room in a shared unit (or, if you're single, sharing a room) there are choices between "consume housing at your current level" and "be homeless".
The CPI-U table has housing as 37% of the overall basket: https://www.bls.gov/news.release/cpi.t01.htm What do you think it should be?
[0]: According to this calculator - https://www.usinflationcalculator.com/
Here's the equivalent chart without inflation adjustment, which gives the (incorrect) impression of sharply rising incomes: https://fred.stlouisfed.org/series/MEHOINUSA646N
we definitely don't need trillion dollar companies selling ads.
You think it's better in Europe? Here in germany everything is going downhill fast
Correction: it's not bad for the economy, it's bad for the investors (the only people who matter in the whole world).
I'm sure a tremendous amount of actual value in the economy has been destroyed by VCs demanding a binary result of either total failure or exponential growth.
You don't win the big price either by taking the big swings. I mean, some people do, but they are so few that they can be considered a rounding error.
Maybe the economy wins when one-in-a-million business unicorn appears, but I don't make any of my other life choices by considering the global economy either, so why would consider it here?
I don't agree. I think this is specious reasoning fueled by a mix of cargo cult mentality and survivorship bias. Just because a hand full of startups made it all the way through to a unicorn status, and some where bought out for undisclosed reasons,that means nothing on whether an idea is or can be hiper-scalable. To make matters worse, this reeks of short-term mentality that serves no purpose whatsoever other than find yet another angle to put together a kind of pump and dump scam.
This is a mental model of how things actually work that is fundamentally wrong and out of touch with reality. In any free market economy you have multiple competing businesses operating in the same market. The world is not a 100m race. Second place can still turn an fantastic profit and make everyone rich.
I agree with you that profitable businesses add value to everyone's lives, but there's a maximalist limit to the relationship where they start extracting value and opportunity overall.
Frankly, not all of the VC sphere is focused on value creation. Much of it seems focused on buzzwords and vaporware. Success in the VC world might mean keeping the hype and promises of hyperscale performance rolling long enough to successfully dump on retail. Sure, VCs and founders profit, but is it genuine value creation?
It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinely profitable value creation.
1000% agree, thanks for the thoughtful reply
Your comment contradicts the "hyperscale or bust" mentality. Hyperscale is not a necessary condition to be competitive. You can put out a better product/service even before economies of scale are reachable. In the meantime, this hyperscale nonsense is nothing more than cargo cult mentality where the need for a sustainable business model is replaced with hand-waving and mindlessly repeating "hyperscale" as a mantra, which has been the death of countless startups.
To me, it seems exactly like the point of view that someone who wins the 100m would have.
> Nor to the US, whose system has if anything produced far too much food for its citizens.
Where people still starve, where people are still homeless, where people still live in poverty. What's your point here?
That's just your own assumption. Who cares what any of us imagines anyone else thinks? It's not really relevant.
Since you're responding and we're having a conversation about each other's opinions, I'd say it actually is relevant.
If you do, you still won't win the big prize. The people who do win the big prize are so few, even in the US, that it's an almost certainty you won't do it. Perhaps you're right that there must be thousands of losers for even a single winner to come up, but that seems so inefficient I doubt that's really true.
I agree, but from a different point of view. Companies put out products and services aligned with their strategies. In large companies, you build up strategies that spread across multiple domains. This means that product managers need to enforce constraints that will go well beyond the concerns of the use base of their specific product. That is a net loss for the customer as the product/service they once loved is now a way to force-feed them things they do not want or care about.
[1] https://asteriskmag.com/issues/07/want-growth-kill-small-bus...
[2] Steve Jobs quote: "It turns out the same thing can happen in technology companies that get monopolies, like IBM or Xerox. If you were a product person at IBM or Xerox, so you make a better copier or computer. So what? When you have monopoly market share, the company's not any more successful.
So the people that can make the company more successful are sales and marketing people, and they end up running the companies. And the product people get driven out of the decision making forums, and the companies forget what it means to make great products. [...]"
Or are you suggesting, that every single cent that every single company earns, comes from something that actually provides value to someone (excluding shareholders)?
Citation seriously needed. There is no argument here, merely a demonstrably false statement. A large company is literally the only kind of entity that is capable of creating entire categories of value which make up a huge percentage of the global economy. Furthermore, a lot of what many, many small businesses are doing, especially very profitable ones, is directly enabled by and entirely dependent on the existence of large businesses.
I can't think of any companies that were more product-focused than Steve Jobs' Apple. They created so much value across so many industries. They created so many transformational products.
Their machines in the 1980s revolutionized personal computing (eg they brought GUIs and the mouse to the world). The iPod let us carry thousands of songs, audiobooks, or podcasts in our pocket. iTunes changed the music industry, giving us an easy way to get the music we wanted without piracy. The iPhone put the Internet in every pocket. Honorable tangential mention: Pixar transformed kids movies and dethroned Disney.
Apple made a ton of money making products that were delightful to use that users happily pay a massive premium for. They made things that were so much more than the sum of their parts.
This makes sense from a VC perspective, but not from a founder perspective (for most).
> it's bad for the Economy
Economy != VCs' pockets
Man, if anything, this is the part that’s weird.
There’s this very weird undercurrent of keeping track of who is “winning” in the US.
Is it not possible that someone who shepherds a hypergrowth startup to IPO, is just as of much a winner as the bootstrapped founder who has a profitable, sustainable business with a handful of employees?
I get it - everyone wants to win. But in hyper focusing on winning, you may lose sight of the fact that there’s lots of ways to win.
The last part of this comment is the last part of Jerry Maguire, because I think Jerry’s mentor Dicky Fox has the right idea about this:
”Hey, I don't have all the answers. In life, to be honest, I failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.”
In most cases in fact its just broken childhood mostly via broken father figure, source of eternal income for most psychologists since those issues are not actually fully fixable, at best they can be tamed a bit and folks brought into acceptance. Add some lower intensity mental issues and voila.
Of course neither money nor power work for such issue, but if one surrounds themselves with enough people repeating such mantras, it may eventually feel like they are right. At least for some time.
Nothing for regular folks here, unless one specifically says and feels that pursuit of happiness is not really on their agenda.
Also, would be nice if somebody compared mental issues drug consumptions US vs Europe say split by jobs. I literally know 0 people, peers, IT colleagues nor friends who take anything on mental health, we are just bunch of relatively happy balanced folks here who are not in frequent dread over some bigger protracted health issue that can wipe one out, don't have to worry about saving up a million or two for out kids universities, have enough time to relax on vacations, fully paid sick days etc. Once one is not desperately poor, this is how proper quality of life looks like, not some numbers on accounts.
I say this as someone who has personally experienced the kind of struggles you talk about in such unflattering terms. (I lost my dad to heart failure at age 7, and have struggled with major depression for most of my adult life.)
Put another way, there is an endless supply of noise (read: competition for attention). If you're not swinging big enough to cut through that clutter odds are good you're just adding to the clutter. That's going to be an endless struggle.
Less risk is actually more risk.
Taking VC money is a poison pill.
was it? Or the inability of other countries to block US startups (because the US government will never let them) makes it impossible for local startups to compete leading to monopolies? If every country went US way of blocking TikTok, the hyper-scale growth would cease to exist fast.
That's not the right question. The correct question is:
Why DOES the presence of US tech companies mean local tech companies can't compete?
And that's the beginning of the discussion. If there is no money to be made, no market will be developed. Block US companies and in a few years you have a booming ecosystem.
Some greasy words. Using VC money to offer subsidized services while capturing the market and killing competition has no relation with being "so good" at providing value, much the opposite.
Is there someone out there focused on selling ten $50m companies at the same rate that this guy is focused on being part of, I assume one $.5bn company?
... an while it's bad for the economy, it may be good for the country. Notice how Europe doesn't have regular school shootings, rampant crime or 100k people a year killing themselves with Fentanyl. It may have something to do with culture that prioritizes other things besides the economy.
Then having got there, a VC-funded competitor will just roll over you as they'll have better connections and funding.
Sales cycles for B2B for big players are insane - price points to offer our stuff to small/medium businesses are not enough.
Even if we provide value and save time for customers it still is hard work all the times to explain the value.
Well the grass is greener on the other side - but I can see how having B2B business where for years you have the same struggles just to keep the lights on and every month is the same and you have the same conversations but with different customers explaining 10x a year exactly the same thing - why you provide the value —— is just something people don’t want to get stuck into and can lead to burnout rather quickly.
So I can see how someone would like to land business idea where the value is obvious and people scream „take my money”.
Sure I want to win the big prize, that's why I'm playing the lottery from time to time. But in my $dayjob, it is and it will stay hard work.
If it actually would be easy, everyone would do it.
The first is looking for a return on investment. If you're going to attract other peoples' money, those "other people" are obviously looking for companies that are going to provide a return. And since a wise investor diversifies their portfolios, they know that a lot of their investments are going to fail, so one way to hedge that is by encouraging all of their investments to grow as much as possible. That way a small number of hyper-performers will make up for the losses.
But we also see vertical growth happen with major corporations as well. Not just startups. And I suspect this has a lot of to do with red tape, over-regulation and bureaucracy. When you need to jump through tons of hoops including getting licensing and permits, setting up tax and payroll accounts... not to mention if you want your company to be publicly traded and the hoops you need to jump through for that ... it can be way cheaper and lower-risk to expand the activities of an existing, already established company than to spin off a new one.
Small projects asking interesting questions will be laughed out of the room, labelled as lack of "ambition". The fact that not all interesting questions require 4-5 years and millions of dollars to be answered seems to not bother people paying the bills.
An important part of running a business is taking a risk.
Furthermore, plenty of businesses fail for reasons that have little to do with the economic value / needed functionality of the product. In some cases, it takes a similar company with subtle differences (or even timing) to really understand why one business failed and a different succeeded.
(One very bad example could be the difference between Sega and Nintendo in the 1980s and 1990s. Compare the NES to the Master System, the SNES to the genisis, and the Game Boy to the Game Gear.)
(Another example can come from comparing Tesla to the dozens of other electric car startups.)
But it works for the USA. Most, if not all the start ups that matter, originate in the US and a lot of them are the unicorns we all use daily like TSLA, GOOG, NFLX, MSFT, META, etc.
And the founders are natives and immigrants, so it is not a demographics issue. It is more of a process issue for the rest of the world.
> Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2–3 years after pivoting three times.
How do you get the moon, if you don't aim for the moon? Risk == Reward. When you don't risk, you end up with startups like in DE e.g. Auctionata, Moped, etc.
This is just the culture in unreasonable VC scenarios. Most new companies are not VC backed and have realistic expectations on the new business.
It does if you want to take a few $m of someone else’s cash, pre-revenue, which is what these startup founders want.
American VC-backed startup culture, you mean. And yeah, that makes sense. If you put money into something you expect to get paid back in 5 years. You need growth to do that.
If you want to go slow, then you bootstrap your startup.
We're self-hosting the docs now thanks to Konfig open-sourcing it: https://docs.snaptrade.com/
Tons of respect for these guys and I wish they'd found a way to make it work.
Also, for anyone finding themselves in a similar situation as Konfig (a product that (some? most? all?) customers love, but revenue not scaling as needed), please consider charging more. We probably would have paid 2-3x what Konfig was charging us and more as we grow, but they never asked and never built in any usage-based cost scaling (like $X/month/SDK, $Y/month/demo, etc).
Wrapping free software is mainly viable towards enterprise customers, where the thing you're actually selling is SLA and a certain level of insurance and sexiness on middle manager CV:s and so on.
I don't really know why, specifically, we ended up being successful. I know I also had a lot of false starts – slightly iterating on the core idea until I hit something people were visibly excited about. I also knew it was a hard market, so I put a lot of my time and effort into non-engineering things. Hacker News was always good to us, especially as I was more vulnerable.
I'd love to hear more! I'm going to reach out privately :)
Overall, though, congrats on all the work you put in. It's incredibly hard to start a company and believe in yourself, and you should be proud!
>"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business."
I think we are unfortunately going to see this outcome appear a lot in the near future as the AI bubble pops
>We then decided to try using generative AI in a vertical B2B SaaS product, believing we could solve previously unsolved problems this way. We came up with and pitched multiple ideas, but user feedback was never positive enough to give us confidence that we were on the right track to build a huge business.
As is, my first impression is something like: "Jeez, whoever wrote this is firmly embedded in a niche fly-by-night culture that instinctively turns me off, and now can't psychologically shake free even immediately after crashing and burning".
We know. It's good at making stuff up. It's bad at facts or for generating things that withstand scrutiny.
This will not produce superior work to someone who knows what they're doing at the controls. A competent programmer doesn't need this. An excellent touch typist doesn't need this. But let's say someone who has a vague idea of what outcome they want, but an incomplete understanding of the mechanisms to get there, can get further with a do-what-I-mean UI.
One of the keys there will be providing a way to nail down the parts that are correct, hold them constant somehow, and "in-paint" the bits that are wrong. For images, we have this figured out, but for larger works, we'll have to think through the equivalents.
Using AI to automate things to rescue a failing product idea is kind of treating AI as a tool. But AI won't fix a bad product idea.
But when you look under the hood it's tooling that wraps tooling. The API categorization tool arguably hands off a large portion of the heavy lifting to OpenAI.
"You are a world class categorizer. Fit these APIs into one of these groups."
The rest of the file is just wiring and a little blurring of the lines of model, view, and controller. I saw some testing and was like, okay this is going to be important if you are wrapping a lot of tooling because "change outside of your control" but then it's just a the default contextLoads() functional test Intellij gives that makes sure dependencies exist and nothing fails at compile.
I think the vision is there and it is definitely aligned to the Pareto principle but it feels like the idea was tested that markets aren't interested in maintaining their stuff while internally they haven't even addressed maintaining their own stuff.
Feels like a Catch 22 where if they could address that reason for themselves first then they could probably solve that for other people. But addressing it means having a product that is being used in order to feel the pain and empathize with the end user.
You shouldn't expect much interest in the code, the value of a company's code without the business and people is quite negative when there isn't some technical secret sauce. Even if there was some technical wizardry people would just care about understanding how that one part worked and probably not use any of the code itself.
This is interesting. I used to work for a mortgage start-up years ago. They built several products for banks and home builders, such as a mortgage vault and tools for signing mortgage documents online.
One condition I still remember was that bank customers required us to put our code in escrow, held by lawyers, in case the company went under. I always wondered if customers could rebuild the code, allocate more resources to develop and maintain it, or simply look for an alternative solution.
they came to us for our solution. I assumed they either couldn’t build it themselves or didn’t want to invest in a custom solution.
in my experience it has just been a way to help business decision makers credibly claim they are managing risk when buying from a startup
1) You should not build a tech startup unless you have either a business plan for getting revenue quickly or shit ton of investment. And you won't typically get investment unless you have at least some notion of where the business is going to be. I've made this mistake. Techies mostly don't understand the business side well enough for this to work.
2) Most companies aren't startups. They are just companies. With revenue. That pay the bills. A startup is a company without revenue that is living on borrowed time and money. Especially if that's your own money, you need a plan for this.
3) VC funded companies mostly fail. A VC's business is to ensure that those companies that are going to fail, fail quickly. They fund their VC business with the handful of companies that don't fail and succeed spectacularly. So, getting "accelerated" or "funded" doesn't mean that you are on a path to success. It actually means you are on the spot to beat the odds and that you don't have a lot of time left. Chances are that you will fail quickly.
4) If you are a successful company with revenue, you don't need VCs. So you should question why you are talking to them at all? Are you struggling to make revenue? A VC won't fix that.
5) A lot of VCs are lazy and don't get interested until you are already successful. There is a weird dynamic here where companies get funded early and then fail. Or don't get funded and then succeed.
My current company is four years into being completely bootstrapped. As in we struggle with revenue and we put in our time when able. I mostly live off consultancy that I do on the side. The company just had its third most successful year in a row and is getting close to where I should be able to retire as a consultant soonish and focus on the business instead. But it's been a long journey.
As for open source. I open source anything that is not business specific or part of our core IP. One good reason for this is that I hate rebuilding the same crap when I start my next company. I've been through this and that kind of stuff just slows you down. People obsess about intellectual property in startups. The reality is that most software is not that valuable. But you still need to spend time, money, and energy building it.
So, I contribute a lot of tools, frameworks and what not of which I am the main user. Just so I can continue to use that stuff on the next project.
Nearly every architecture decision is "which open source tool can I use to solve [problem]".
No one wants to pay for anything and that's ok.
I feel like a lot of value could be unlocked if there were some way besides random chance and networking for skilled developers looking to start something to discover people with problems, domain expertise and entrepreneurial ambition.
The main problem here is that non-programmers are often so entrenched in their workflow(s) that they fail to see what can be automated and wind up proposing nice-to-haves instead of tasks critical to their mission.
Moreover, they're more likely to dismiss 80% solutions because the introduction of new unknowns/things-to-check adds enough uncertainty to make them uncomfortable. "The new thing always puts things here instead of there and it doesn't handle these cases. I miss the way we used to do things."
There's a secondary problem here that many developers are employed and don't typically have a personal tools budget. This narrows the market effectively to developers that are free lancing or the bosses of developers that are employees.
The team managers will scrutinize a lot of spending on this front and typically not have. a lot of budget for this. And there is no such thing as a personal tools budget for developers in most companies.
Freelancers mostly just use the same tools as the companies that pay them. Which is mostly free tools. Non free tools actually complicate getting freelancers because now you need to worry about getting licenses for your contractors as well. So, there's a bias towards keeping things simple here and just avoiding such tools.
And you know where developers hang out and what kinds of things do well there. So everything's good, right?
But as you said, many of them don't want to pay for things, and many will find open source solutions that'll do the job needed instead, even if it's a tad less convenient than your potential solution might be. Plus, you're literally selling people whose job/life involves creating software, so their answer could just as easily be "build something myself to do this" instead.
> Looking back to March 2022 when I left my job to pursue this startup full-time, I have absolutely no regrets. I knew the risks—that failure was a very real possibility—but I also knew I had to take this chance. Today, even as we close this chapter, I'm grateful for the failure because it has taught me more than success ever could.
This is something I could really use! Is there a product that does this and doesn’t cost an arm and a leg?
- Speakeasy
- Fern
- Stainless
First SDK with Speakeasy is free and we also have discounts for companies who are just starting out.
Feel free to shoot me an email if we can be useful: nolan@spakeasy.com :)
Including the semi official tools https://github.com/OpenAPITools/openapi-generator
Now if you want multi language generation and especially high quality you may have to spend a lot of time evaluating different choices. I decided that the official java client didn't generate very nice python code and went with https://github.com/openapi-generators/openapi-python-client even though it's a small personal project with a primary developer+random contributions from users. It just seemed nicer to use for python. Finding which generator to use especially for JavaScript seems difficult
All others are too expensive at ~250$/language/month (still less expensive than human developer).
In my mind, I also had a thought that we would rise and be huge, but I let go of that one. Instead, we just put one foot in front of the other and what warms my heart are those stories like when a person in Uganda got so confident thanks to our app that he opened his own language school. For this it makes sense to continue.
What I want now is just to have a nice work/family balance and the app paying my bills and something extra. That would be a great start.
There was a data startup ran for ~3y until the 10 person team imploded in a tough market. Everyone left or was laid off, the office was closed, operations ceded etc. The website and some collection were still left running in zombie mode.
A couple of years later, the non-technical founder and CEO (who at this point had bought everyone else out) saw demand and PMF emerging. Mostly through serendipity, I was one of 3 people brought in to "see what we can do with it", originally intended as a 3 month project. We came in with zero context and jumped right in to figuring out the ship we were now sailing. I was able to have one or two of conversation with the previous CTO but that was about it in terms of overlap.
Things progressed and within a few months we found ourselves as co-founders of "Company v2.0". My partner took over as CEO.
I left after 2y around our series A when we were 20~30 employees and arguably a leader in our market segment. At that point there were significant and crucial parts of the stack and codebase inherited (and evolved obv) from the original efforts by the previous team. The company is now an established brand, have offices in several countries and had a successful series B last year.
A bigger example might be Mozilla. It was a closed-source browser (Netscape Navigator), and when it was dumped, some employees petitioned to open source it. And that's how we got Firefox.
YOU didn't fail. Your business failed. It's an important distinction.
You are not your business - for your mental health.
At that age you have plenty of time to pursue many things but you often lack the experience needed to succeed in the B2B market.
You definitely need support from someone with sufficient B2B experience, or you might have better luck focusing on something in the B2C space.
My only advice if he really wants to continue pursuing B2B is to find a partner who can sell the product. Selling is a full-time job on its own.
About the code - would you be willing to add an MIT License? I don't see the code being used without a permissive license.
I have a lot of friends who build tools in book shops, martech, payments and other niches.
There are so many markets people. Most of them are unknown, and therefore, low comp.
Publishing your results makes you part of history. Respect.