It’s exactly one year since my first Cornerstone Technology blog post, where I promised myself that this time, it would be different. Looking back, it seems I wasn’t wrong, although I’m not sure it’s been different in all the right ways…

Firstly, an apology. In my first post, I promised that “over the coming weeks and months, I plan to write regularly about the development of the business”. Underestimating my forthcoming workload, and the challenge of setting aside time to write something worth reading, I would have probably been better off promising to write irregularly. Including this post, I managed to publish 15 articles this year, with the following distribution:

(Upon reflection, I probably set the bar too high aiming to publish every week, although it’s a good discipline if you can manage it.)

Of course, Real Artists Ship

The above sorry-looking chart is only part of the story though. This morning whilst taking a quick skim across the 1715 unread articles (!) in my RSS reader, I was struck by Seth Godin’s end of year challenge:

What did you ship in 2010?

After a little analysis, this turned out to be more positive experience than I first anticipated; not quite Seth’s catalogue of successes, but a reasonable set of achievements nonetheless:

• Published my first article on Wikipedia, on FIXatdl naturally
• Launched the FIXatdl Jump-Start service and signed the first customer
• Delivered the FIXatdl for European, North American and Asian algorithms for a major broker
• Developed and published Atdl4net, the first open source implementation of FIXatdl on .NET (although it has a lot of rough edges, it is nevertheless a very useful reference implementation)
• Launched AtdlTools.com, home to a free FIXatdl validation service that leverages Atdl4net

So the final picture doesn’t look quite so bad, after all:

This time, it is Different

As I mentioned above, second time around, I wanted to learn from the mistakes made in my first venture. In a few ways, I think I have:

• Staffing – at my first firm, we added staff approximately at the same rate we generated new revenue. In theory, this gives you more capacity to build product, but in practice it often means you build stuff nobody wants, just because you can. At present, Cornerstone Technology is still just me, and I’m inclined to follow the example of Peldi Guilizzoni, founder of Balsamiq, whose approach was “wait until you are about to die” before hiring someone. (There’s a lot more great insights from his talk at Business of Software 2010 (BoS2010) in this excellent write-up);
• Doing things properly – as mentioned in my earlier post, being properly organised for developing software is critical. Things are much easier and cheaper these days – programmes like Microsoft’s BizSpark means the entry-level costs are minimal, and there is so much available on the web, either free or reasonably low-priced. Despite being an organisation of one, most of the key tools and disciplines are already in place ready for product development;
• Focus – although I can’t say everything I’ve done this year has been focused on my chosen area of FIXatdl, I have managed to keep it as my primary business focus, and I am clear where the long-term business growth is coming from;
• Not building stuff that nobody wants – this was endemic in the first few years of my first business, but as there’s only me in the new business, I’ve been forced to be much more thorough in terms of what to build. I’ve also had the advantage of getting a lot of insight into what a prospective customer might need through the Jump-Start service.

What’s Next?

Since becoming involved in the algorithmic trading space, and in particular with FIXatdl, I’ve believed there was a product opportunity out there somewhere. I just wasn’t clear exactly what it was. The problem with this predicament is that you risk running out of capital while you’re still working things out in your mind.

Thankfully, at BoS2010, a fellow entrepreneur, Chris Parsons (founder of Knowledge Architecture, a successful San Francisco-based solution provider for architect firms), helped me see that I needed more time to get a clearer idea of what to build. Following on from that insight, I’ve subsequently taken on a part-time consulting engagement at my old firm, which runs for the next six months or so. It’s not specifically in the algorithmic trading space (although it is to do with the FIX protocol), but it does mean that I don’t have to worry about putting food on the table. (My wife had previously threatened me that if the business wasn’t generating decent revenue by year end, then she expected me to go out and get a proper job – perish the thought!)

So the next step in the limited time I have left to myself is to define and build some sort of minimum viable product. I hope to have more to report in time for the FIX Protocol EMEA Conference on 1 March. To avoid any disappointment, I won’t promise to write before then!

I’ve briefly mentioned the Business of Software (BoS) conference in past posts – it takes place annually in the United States around this time of year, and this year it was held in Boston. As was the case last year, it was a great opportunity to learn from people who’ve built great software businesses, and I would go so far as to suggest it is the best conference for software entrepreneurs anywhere in the world.

Attending Business of Software is not unlike being a comic book fan attending the Marvel Conference, only to find the real Iron-Man, Spiderman and Captain America are taking part! Not just taking part (and in many cases, speaking), but available there for you to talk to and share real-world problems with. And although clearly successful in their own fields, none of these guys are aloof or patronising, but in fact turn out to be genuinely nice people.

This year, amongst the superheroes of software were Joel Spolsky (the first serious developer blogger and the man that taught the software world to value developers), marketing guru Seth Godin, founder of Smart Bear Software Jason Cohen (arguably the father of collaborative code review), Dan Bricklin, inventor of the spreadsheet, and relative newcomer Peldi Guilizzoni, creator of the hugely successful Balsamiq Mockups wireframe tool, to name but a few.

The first two days of the conference were packed with useful information for people thinking of starting or already involved in an entrepreneurial software business, and even for the few looking to get out of one. Attendee Mark Littlewood of the Business Leaders Network posted a series of excellent summaries of the talks, and doubtless some talks will go up as videos in due course – definitely worth looking out for.

What I didn’t expect…

The first two days of talks were great, but it was the last half-day that affected me most profoundly. Some nine months ago, I wrote a post talking about the kind of startup founder I saw myself as. It was triggered by an article by Jason Cohen explaining why he sold Smart Bear when he did. In short, I was arguing that if your motivation for founding a startup is primarily to make money, then firstly there’s nothing wrong with that, but secondly that you are better off being clear about that up front.

The problem with this line of thinking is that starting a software business purely to make money just doesn’t compute, although the reason isn’t immediately obvious. One thing that was clear from the talks over the first two days is that behind every successful startup is passion – passion for solving the customer’s problem, passion for providing a great product and passion for providing great service behind that product. Focusing just on generating cash doesn’t foster passion like that, and arguably inhibits it.

Furthermore, unless you are running a lifestyle business with no staff, you need your employees to exude that same passion, but once they work out that you’re only in it for the money, any enthusiasm they had for the business will quickly wither, and you will end up having built precisely the type of company you so desperately wanted to get out of before you started your new business.

Joel Spolsky was the last speaker at BoS 2010 (curiously the only speaker at the conference who didn’t use slides but whose talk was nevertheless captivating). He talked very candidly about the process of raising $6MM of venture capital funding to grow StackExchange (the platform behind the invaluable StackOverflow Q&A site for developers). Aside from the fund-raising process, for me what was interesting was Joel’s attitude towards business, and towards his team at Fog Creek Software (based in NYC, they publish the highly successful bug tracking product FogBugz). What struck me through listening to Joel (and also through talking to people like conference organiser Neil Davidson (who, in his spare time, is joint-founder and CEO of .NET/SQL tools vendor Red Gate)), is that these guys are genuinely interested in building and sustaining a great place to work for all their staff. Taking this onboard, there then is another consideration for founders who are building a business with the primary goal of selling it off once it’s successful – it’s rare that an acquirer will be interested in the caring culture you’ve painstakingly built; more likely that they’ll see it as excessive, expensive and ultimately just a load of unnecessary sentimentality.

Not the whole story…

That’s not to say that there’s anything intrinsically wrong with selling your business eventually; there may come a time when the business has outlived your contribution – for example, BoS 2010 speaker Derek Sivers talked about how over time he lost his passion for his music publishing business CD Baby, and that by staying with the business he was actually doing his customers a disservice. (Interestingly, he then put most of the funds from the sale, some $22MM, into a charitable foundation to fund music education after his death). As he notes on his blog, he felt that CD Baby’s new owner would take much better care of the business going forward that he was able to.

To close, I still believe that when you build a business, in the end it is first and foremost a business, but at BoS 2010 I was challenged to think about a bigger picture, about other people. To quote several speakers at the conference, I’m still a red-blooded capitalist at heart, but over the past week I’ve come to see that there’s more to life (and business) than the money. To borrow from the philosophy of Joel, Neil and many others at Bos 2010, making the world a better place, one co-worker at a time, is not just a laudable goal, but should be a core tenet of being a responsible entrepreneur.

If you feel the same – that’s there’s more to being in business than making money…  or perhaps you feel I’m being soppy and sentimental? – Please leave a comment and let me know.

As this blog is sub-titled “The Story of a Software Start-up from Day 1″, faithful readers could be forgiven for thinking that this particular start-up has stalled; six months without any update might even suggest I’ve been made an offer I couldn’t refuse and quietly gone back to having a proper job.

Thankfully, that isn’t so. To keep the wolf from the door, I have been busy with a few consulting assignments, whilst doing some speculative development in my spare cycles. Keeping a new business afloat without outside investment is quite a challenge, as Jason Cohen pointed out in a comment to my earlier article on bootstrapping:

Another thing to be cautious about with bootstrapping is that the starvation, although leading to good habits like thrift, also lead to bad habits like being distracted by consulting offers (cause you need the cash) or not being able to capitalize on some opportunities just because you don’t have the cash or manpower.

Thankfully, the consulting work I have been doing has, at least to some degree, been aligned to my target field, FIXatdl, but it is none the less very frustrating that my product ideas are taking so long to come to fruition. (And this, in part, is my rather poor excuse for the long period of radio silence on this blog.)

As mentioned in the article Our first product (isn’t a piece of software), the FIXatdl Jump-Start service was launched to help firms get FIXatdl compliant. With one major broker’s conversion from paper-based specification to FIXatdl completed and another due to start shortly, the service has been a measured success, but I believe the opportunities for related products and services around FIXatdl is so much broader. FIXatdl has only been adopted so far by a handful of buy-side technology firms, which is a shame because it solves a very serious business problem quite neatly. My view is that, in the words of Malcolm Gladwell, FIXatdl hasn’t reached its Tipping Point yet.

I believe that FIXatdl needs a little push to help drive its adoption, so I have been working on a FIXatdl implementation for .NET, which I have decided to release under an open source licence. (There is already an open source implementation for Java, called atdl4j).

Onlookers might of course ask “… and how exactly will that help generate revenue, if you plan to give away the source code?” Firstly, unlike atdl4j (which is released under the very liberal MIT Licence), Atdl4net (for that is its name) will be released under a dual-licensing approach, LGPL and Commercial. The idea here is to boost adoption of FIXatdl by encouraging firms that have in-house developed trading systems to use the LGPL-licensed version freely. However, firms that make money from selling trading systems will more likely want to license the software under commercial terms. Regarding the former group, there will always be the normal revenue opportunities that go with providing an open source solution, such as integration consulting, training and support. Unlike the current atdl4j implementation, Atdl4net will be offered as a piece of commercial open source software (Dirk Riehle of SAP Research provides a very good study of the distinction between commercial and community open source which has certainly helped me get my thinking clearer.)

For someone who has worked in the conventional commercial software market for over 25 years, this is a huge change in mindset. Whilst I don’t believe the commercial closed source model for software is going away any time soon, there’s no doubt that interest in open source has grown tremendously over the past 5-10 years, and I would never have predicted that someone would offer a complete order management system under open source.

It remains to be seen how effective atdl4net will be to help drive FIXatdl adoption (and perhaps more importantly, Cornerstone revenue), but you can see the fruits of my labours over at http://atdl4net.org/. There are two downloads, the Atdl4net library and a free viewer application, Atdl4net Explorer. For the more curious, you can see Atdl4net Explorer in action by clicking the ‘Launch’ button (which downloads and launches the application), selecting File -> Open from URL.. and then selecting the sample file from the drop-down. The sample won’t win any prizes for graphic design, but it does show all the FIXatdl widgets in action.

My next post (hopefully sooner than six months hence!) will talk about progress commercialising Atdl4net – stay tuned!

* With apologies to Mark Twain for the blatant misquote.

Some people believe that Open Source as a business model just doesn’t fly in highly vertical markets – do you agree?  Please leave a comment and let me know.

Most people want to be better at what they do, more successful, more fulfilled, wiser, smarter, cooler, whatever… … and I’m no different. I fuel this quest for self-improvement by reading other people’s writing, mostly through blogs (although I read a fair few business books too). The trouble with the ‘blogosphere’ is that the signal-to-noise ratio is pretty low, so I thought it would be interesting to list out 5 sources of genuinely thought-provoking material. I’ve picked out a specific article as a starting point, but these writers are people who have challenged the status quo in my mind, and caused me to evaluate my approach to a specific area of business.

In no particular order, they are:

1. Seth Godin‘s The Reason You’re Stuck (and the one best way to avoid the six ways that will keep you stuck)

It was through Seth’s guest post on the excellent Zen Habits blog that I got to hear of “The Resistance”, the thing inside of any artist that keeps them from shipping. Seth often references Steven Pressfield, who first pinpointed The Resistance in his somewhat unorthodox book The War of Art (highly recommended). Researching for this post, I came across Seth presenting on the subject on video here – it’s well worth 18 minutes of your time.

2. Jason Cohen‘s Your idea sucks, now go do it anyway

When you start a new business, unless you’re the sort of person who is 100% drive-and-optimism (in which case I, in equal parts, hold you in awe and in contempt), the inevitable self-doubts come to call. One of the big fears is “my idea isn’t good enough to build a business out of”. Jason answers this question very eloquently – in short, it really doesn’t matter (although I have argued elsewhere that it does matter a little). As someone who has built and sold at least one successful business, Jason has a lot of great insights on his blog.

3. Steve Pavlina‘s 10 Reasons You Should Never Get a Job

As I’ve said before, I don’t agree with everything Steve writes or believes, but when I read this post he published in 2006, it made me think long and hard about my attitude to being employed. As I noted in this article, our current business structures would collapse if nobody was prepared to work for someone else, but I think you should ask yourself regularly whether your job is helping you achieve your personal goals, at the pace you desire, or if perhaps jumping from the security of the corporate ladder would give you the opportunity to achieve so much more.  (Another recommended article on his blog is about getting up when the alarm goes off – especially the insight about your “5.00am brain”.)

4. Paul Graham‘s How to Make Wealth

In this essay, Paul explains the fundamental economics of start-ups, why it’s possible to generate significantly larger amounts of money per capita than in ‘regular’ businesses. He makes it clear that whilst there is no free lunch, many factors conspire to make being part of a start-up a great way to achieve financial freedom in a relatively short amount of time. Having been on both sides of the entrepreneur/VC fence, Paul has plenty of good insight and advice to offer in his essays.

5. Kathy Sierra‘s Why marketing should make the manuals!

This is just one of the many insightful articles at Kathy’s Creating Passionate Users site, where she offers a very unique perspective on product design and usability. It was through her writing I came to see that making your users look good and/or feel good as a result of using your product was a great way to build brand loyalty. (Sadly Kathy Sierra doesn’t write any more after an unpleasant online incident in 2007, but I was lucky enough to hear her speak at the Business of Software Conference 2009 – some brief notes from the talk are here, but hopefully the video will go up on the conference site soon.)

I hope readers find one or two of these useful.

Where to go from here

Since my last post, I have issued our first press release on the FIXatdl Jump-Start service – it generated some interest in the media, but not much in the way of new business (yet, at least). Now I have some idea of where the business is going (a few of my instruments are working, even if visibility is still lousy), I plan to split my writing time between working on this blog and writing a series of articles on algorithmic trading and FIXatdl. That probably means shorter (although hopefully more regular) blog posts, but I should also be able to generate some content that is useful to people working in the same niche. My intention in keeping the two areas separate is that less people will be bored by stuff that isn’t relevant to them – please let me know how I’m doing.

Are there online writers you particularly enjoy, or that have caused you to change the way you think for the better? Please leave a comment and let me know.

Prompted by a recent question on Answers.OnStartups.com, I’ve been thinking about the classic problem of building a business which requires some level of critical mass to succeed – the so-called “chicken-and-egg” problem. Although sometimes a new venture is dependent on network effects for its success (e.g., the telephone, Facebook, Twitter, LinkedIn, etc.), the more common problem occurs where there are two sides to the market: buyers and sellers, contributors and consumers, writers and readers, and so on – here having one without the other is pointless.

In an answer to an earlier question on OnStartups, Moluko‘s Hendro Wijaya gave the following wise advice:

Focus on satisfying one side of the equation first. Pick the chicken, or the egg. Make sure they can see the value early in time.

I think that’s the key – making sure you put value in the hands of one side or the other, at the earliest possible opportunity. Build one side of your community by giving them something they can’t get elsewhere. As Chris Dixon observes in his article Six strategies for overcoming “chicken and egg” problems, when the early manufacturers of video recorders (VCRs) released their first products, there was no Blockbuster to rent your videos from – in fact, there was no pre-recorded material available, period. However, the VCR provided stand-alone value by allowing people to record their favourite TV shows and watch them later, something that was sufficiently valuable to justify the expense of the device, without pre-recorded content. It seems likely that this was a market of early adopters, as during the Eighties and Nineties most normal people couldn’t work out how to programme their VCRs – doubtless this drove the demand for video rentals (the other side of the market) which followed on.

The nice thing about this approach, especially if you’re bootstrapping, is that you get to charge for this early value, and bring in some much-needed revenue. Even if you didn’t need to, this is a good discipline as Ash Maurya points out, as part of your customer testing means verifying that prospective users will actually pay money for your product or service.

Chicken-and-egg problems come in all shapes and sizes, and whilst it’s easy to see the sense in tackling one side of the market with a minimum viable product (MVP), it isn’t so easy to know what that MVP should look like. This is especially true when trying to build something new that your target users aren’t able to envisage – getting inside your target users’ heads is no use when they have no idea what they want or need. Sean Tierney has helpful insights on this challenge in his blog post sub-titled “bend one of the flaps“. He opens with this astute observation:

The term “bootstrapping” itself comes from a myth of a guy who found himself drowning in the sea and was able to grab his own boots an lift himself out of the water to safety- a physically impossible feat! Arguably though, bootstrapping a company from zero resources is an equally “physics-defying” task.

Sean suggests that in order to solve the problem, you have to mentally “bend the flaps”, in much the same way as you do physically when closing a cardboard box without sticky tape. For me, the solution to the question “what product to build for group of users X?” is to go and become one of them (for a short while, that is). In the enterprise software space, this doesn’t mean taking a job in your target field (although that works for some people) – you can achieve much the same thing by offering a consulting service that is specifically focused on your target user/problem. Once again, that has the added benefit of bringing in revenue whilst you learn all about your target users.

This approach isn’t for everyone. In particular, it doesn’t work if you need to get to market very quickly, before your competitors, but if that’s your situation, I’d argue you shouldn’t be bootstrapping anyway. And of course, if you are going to offer a consulting service on a specific theme, you’d better have some real expertise in that field to offer.

FIXatdl Jump-Start Launch

Attempting to stay true to the strap-line of this blog, here’s a brief update on the business. For the most part, I have been busy getting a new targeted consulting service ( ) off the ground, something I call FIXatdl Jump-Start. Through a bunch of speculative development in the first couple of months of the business, and by participating in the relevant industry standards body working group, I’ve built up some handy expertise in the FIXatdl standard which currently is in high demand.

Recognising that the majority of normal people have any idea what I’m talking about when I refer to FIXatdl, I put together a Wikipedia article which provides (I hope) a pretty reasonable overview. (If you’re working in a niche area, creating educational materials on your site and linking to them from sites like Wikipedia is a great way to help get your company’s name out there.)

The Jump-Start service launches next week at the FIX Protocol Limited (FPL) EMEA Conference in London, but I’m delighted to report that I have my first customer for the service already, a tier-1 investment bank, no less. I’ll be on the FPL stand (or ‘booth’ for readers the other side of the Atlantic) next week answering questions on FIXatdl – do stop by if you happen to be at the event.

Seen other neat ways to tackle the chicken-and-egg problem in a bootstrapped world? Please leave a comment and let me know.

This blog is sub-titled The Story of a Software Start-up from Day 1, but much of the writing has been in the form of tips and advice for people in similar situations. Hopefully some of it has been helpful and interesting to at least some of my readers. However, to date, there hasn’t been too much content about the development of the business, and this is largely because I didn’t really have much of a clue where the business was going.

Over the past week, things have become just a little bit clearer, and I am nearly ready to launch my first product. Curiously this product isn’t a piece of software, or even a more trendy Software as a Service (SaaS) offering, but rather a packaged consulting service.

It is clear to anyone who has studied technology businesses even to a rudimentary level that software product businesses scale much better than service businesses, so why am I launching a consulting offering? The main reason is that I have been working in an area where I think there are product opportunities, but I really don’t know where to focus my efforts. Regular readers will be aware that I am a keen proponent of “systems thinking” when it comes to product delivery – providing a complete solution (for example, as Apple did with iTunes and the iPod) rather than just a piece of software and a manual. The challenge with delivering a well developed ecosystem around your product is that it takes time (and money) and you better know what the customer needs, or you’re going to burn a lot of resources trying to second-guess those needs.

My conclusion then was to take the expertise I had developed over the last few months and turn it into a packaged service offering. You can read a little more about my FIXatdl Jump-Start service on the new Cornerstone Technology home page – unfortunately it is such a niche area that many readers may find it a little impenetrable, but I’m sure you’ll get the general idea. In terms of strategy, I plan to spend the next few months working with customers as part of the service offering, and based on that experience, establish next steps for the software products I think would be of value. Of course, I’ll be documenting my findings as this whole thing develops.

I’d be interested if others have had similar experiences or taken a similar approach on their way to building software product businesses – if you have, please leave a comment and let me know.

In his 2005 essay How to Start a Startup, Paul Graham wrote (emphasis mine):

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

The term “Lean Startup” has gained in popularity since it was first coined by Eric Ries in his September 2008 article. Summarising his manifesto, a lean startup is one that is defined by low burn rate coupled with the broad application of “lean thinking” methodologies – alternatively referred to as agile – not just within the development organisation, but also by applying “ferocious customer-centric iteration”.

Within Lean Startups, Ries expects to see the adoption of commodity technologies, specifically open source platforms, such as the LAMP stack, at their core. As someone who’s predominantly worked with Microsoft technologies during the last ten years, I obviously want to leverage that skill-set in my new business – does that mean I’m Anti-Lean? Not according to Dave Concannon who argues otherwise, suggesting that vendor-controlled platforms (such as Microsoft’s) are equally viable as long as you’ve got great developers producing the solution working with great customers who understand the problem.

As much has been written about the application of lean thinking; I thought it would be interesting to provide some suggestions on how to maintain low burn during the early days of a new business. I hope this will be generally useful to “new starters”, and maybe more so to those this side of the pond.

Only Pay for What You Have To

Blindingly obvious, I know, but it’s worth knowing what’s out there in terms of free or nearly free stuff. Here are a number of examples that I’ve found useful:

• Microsoft’s BizSpark programme – provides free access to qualifying organisations, for three years, to a broad range of Microsoft software, including development tools
• Atlassian’s Confluence enterprise wiki – costs $10 (for up to ten users)
• TargetProcess agile project management tool – first five users are free
• Xpenser – free and rather good expenses tracking application
• Google Apps Standard Edition is free – Premier Edition is only $50/year
• WordPress blogging platform (my personal preference) – available free with most hosting accounts, or at wordpress.com (although unless you’re Seth Godin, you want to avoid a blog URL like mycompany.bloggingplatform.com, so you may have to pay a little. Whilst on the subject, here’s a useful pointer on WordPress hosting.)
• TripIt – invaluable (and free) if you do a lot of business travel
• Some great tools from 37 Signals – most have a free option although it’s a lot less prominent than it used to be (- there seems to be a bit of trend away from fremium models more recently)

In terms of hardware, I have long been a believer in having the best kit on developers’ desks, but unless you’re building high-powered mathematical or graphical applications, it probably doesn’t make sense to buy brand new equipment – I have been surprised by what you can find on eBay, often with at least two years warranty, at 60% of the original cost. As it happens, I was lucky to be starting when a (not so lucky) friend of mine’s business went into receivership – I got a load of kit for very little money.

Only Operate What You Have To

In an ideal world, I would have precisely zero (0) servers at the office. However, being a Microsoft shop means running Team Foundation Server (remember, via BizSpark, it’s free), and it currently doesn’t make sense to try running TFS remotely as network connectivity at my premises (like much of the UK) is a little slow and unreliable. (I note that some firms in the US are starting to offer this as a service – see for example, TeamDevCentral, but I think high quality comms is a prerequisite). This translates into a minimum of two servers (thankfully, although it’s not recommended, everything in the Visual Studio Team System 2010 setup can run on one Windows 2008 R2 server) – one domain controller and backup domain controller. A third server runs Microsoft Home Server (yes, at the office) backing up all the desktops every night, making it quick and easy to recover from a disk crash. (If you are happy using Subversion, you can forgo all this – see for example, here and here.)

For everything else, hosted services are the way to go. Again as a long time Outlook/Exchange user, I looked for someone to provide a hosted Exchange service. Sadly Microsoft’s offering, Microsoft Online Services, has a minimum user requirement of 5 users, but there are plenty of other vendors offering hosted Exchange for single user up. (Here in the UK, Simply Mail Solutions seems to be about the best value I’ve found.)

These days, unless you are generating crazy amounts of data, using daily tapes makes little sense; on-line backup services are so much more convenient (although of course, backing up is only half the story). I’ve settled on an Attix5-based service from Techgate partner Zenzero which seems to work pretty well, but I’m sure there are plenty of others out there. Backups are obviously not a place to skimp.

Staffing

Without doubt, the single largest expense in any software start-up is salaries. I used to believe that the only way to grow development capacity was by adding bodies, which in my first start-up translated into us taking on developers as fast as our income would sustain. Although it wasn’t obvious at the time, this mindset is plainly flawed; apart from ever reducing productivity as foretold by Fred Brooks, it meant we were regularly on the brink of running out of money.

I now see that part of the trick to growing development capacity is becoming more efficient – ensuring that developers know exactly what needs to be done (i.e., minimising waste) and ensuring the environment is conducive for maximum output (i.e., minimising interruptions and distractions). The point I’m trying to make from a “low burn” perspective is to avoid the knee-jerk tendency to add developers in order to achieve more output, at least until all other avenues have been explored.

The Other Side of the Coin

Whilst it’s important to keep unnecessary expenditure to a minimum, it’s all the more important to invest in yourself and your team, whether that means developing your technical skills through training events, or improving your business know-how through attending relevant conferences. On this front, my favourite event is the Business of Software Conference, where you get to hear the experiences of world-class speakers, many of which have built substantial businesses. Although, all told, this is several thousand pounds of expenditure plus the time out of the business, I think it is worth every penny; if you’re thinking of starting a software business, I can wholeheartedly recommend it.

If you have your own tips for maintain a low-burn environment, I’d be delighted to hear them. Please leave a comment and let me know.

It’s well known that when starting a software business, the idea isn’t the most important thing. As Jason Cohen points out:

Your idea probably sucks, and it doesn’t matter because your business will probably turn out to be something completely different.

When you’re working in a self-funded start-up, though, you feel it must matter, at least just a little bit. The point is: how many second-rate ideas can you afford to burn through until you run out of cash? In the mind of the bootstrapping entrepreneur, this question can generate a paralysing fear all of its own, which goes along the lines of “Do I stand a chance of being successful with this thing I’m working on, or am I’m going to run out of money in the pursuit (and have to go back to the job market with my tail between my legs)?”.

Previously I talked about how to deal with external sources of negativity – this post attempts to provide some thoughts on dealing with the voice from within, as I’ve been facing this very fear during the past week. Hence I thought it would be interesting to talk a little about the more general issue of dealing with self-doubt.

I wondered if this lack of confidence was just me – a genetic personality flaw amplified by my upbringing or my past experiences. However, when I started to do some research, I found that many believe it is part of an entrepreneurs’ standard make-up, as for example Tim Ferriss, author of the The 4-Hour Workweek suggests:

It’s an integral part of building anything remarkable, whether a business, a relationship, or a life. Expanding your sphere of comfort and abilities comes with a cost: repeated self-doubt.

In researching how to deal with this self-doubt, I came across Canadian Business Coach Cameron Herold – he describes a tool he calls the Transition Curve, which is a little reminiscent of the four stages of competence. It looks something like this:

It isn’t completely clear what the vertical axis means, but the horizontal axis is obviously time – note that this cycle often repeats itself many times over in the life of a start-up. In any case, it’s quite a helpful model on how our feelings tend to operate as we move forward in any new business, past the initial optimistic phase, into the will I ever ship?, will anyone want it?, why are we here? phases and then (hopefully) into the hey, this is actually working! phase.

Whilst I’m not really a proper mathematician (as the following results show), I felt it would be interesting to differentiate the curve, hoping that this might give some better indication of “mood” over time. Here is the result:

(Above the axis is good, below the axis is bad. In the spirit of Uninformed Optimism, I’ve omitted the Crash & Burn option).

The first observation is that when you’re at the points of worst self-doubt, the only way is up, and while you might not feel too good about things, the trend is definitely a positive one. The second observation is that the fundamental shape of the curve is unchanged – life in a start-up is much like being on an emotional rollercoaster. I confess I’m not a big fan of fairground rides.

The question then, is how best to deal with this emotional cycle, especially at the low points where your demon of self-doubt is at his most active? First it helps to know that everyone goes through it at some point, as noted above. Secondly, it’s important to resist the temptation to ‘stall’ – if fear causes you to freeze like a rabbit caught in the headlights, then in the best case, you stop learning through making mistakes, and in the worst case, you fail to reach a perfectly attainable goal. (The tendency to want to give up in the face of adversity is captured nicely by Seth Godin in a guest post on the excellent Zen Habits blog). Thirdly, ask yourself the question “what’s the worst that could possibly happen?” – it probably isn’t half as bad as you first feared. (I picked this tip up from Bob Parsons, founder of GoDaddy, where he quotes his father’s advice: “… if it doesn’t work, they can’t eat you!“).

Practically, this last point was a real help to me this week – I realised that even if I failed to make a business out of the software I was building, I would still have developed substantial expertise in a niche where few people are experts and demand is only set to grow. So my “what’s the worst that can happen” scenario is that I end up leveraging this expertise through high value consulting, while I look for the next big idea.

The key message is that whilst there may be plenty of reasons to revisit what you are striving for in your start-up, fear of failure shouldn’t be one of them!

Resources

1. Cameron Herold describes the Transition Curve in this Canadian Business Online podcast.
2. The Prescription for Self-Doubt: Watch This Video – short article by Tim Ferriss containing a very moving video about going forward in the face of adversity.
3. Bob Parsons’ 16 Rules for Success in Business and Life in General – they can’t eat you and other motivation tips.
4. (Relating to the supremacy of ideas) Ed Catmull, founder of Pixar gives an interesting talk about the history of Pixar, where (amongst other things) he makes the point that having great people is more important than having great ideas.

Did this strike a chord with your experience? Perhaps you have other tips for dealing with fear or self-doubt? Please leave a comment and let me know.

As I left Reuters (now Thomson Reuters) at the tail end of 1998, grand dreams about the kind of business I was going to build soon gave way to cold harsh reality – that in fact I didn’t have a clue what I was doing. Compared with the present, 1999 was a very different time to start a business. The internet was in its relative infancy, with little more than 40% of Americans on-line (probably even less people in the UK). Although invented some ten years earlier, xDSL was still a way from becoming mainstream and most people were getting by on V.34 dial-up modems running at 28.8 kbps. Although it was the height of the dot-com era, unless you were in a cool start-up venue like Silicon Valley, you were largely on your own. The first Joel on Software article wasn’t due for another twelve months and In Search of Excellence was the only business book I owned – given its follow-up publicity, it was perhaps fortuitous that I never got round to reading it. Any success we subsequently enjoyed in my business was largely due to a combination of good luck and the presence of some genuinely bright, hard-working people around me.

Things are very different these days, in great part because the Internet has made everything so much more accessible. Through the magic of the web, I’ve been able to learn from dozens of blog authors who, in terms of founding companies, have been there, done that, and got the T-shirt. (There is even a place to go and ask questions of many of these founders.) Since my last firm was acquired roughly four years ago, I’ve also had the opportunity to read more books about entrepreneurship (many of which have been written in the last decade) – again the Internet has made the process of identifying and buying good business books so much easier. One book I was challenged by last year was Geoff Moore’s Dealing with Darwin – How Great Companies Innovate at Every Phase of Their Evolution – it was this book that convinced me initially to propose a spin-off business to my then current employers, and subsequently to leave and start another business. (Prior to Darwin, Moore wrote the seminal technology marketing book Crossing the Chasm). So you can imagine how pleasantly surprised I was to be sitting at breakfast with the author himself at the Business of Software conference in San Francisco last November, and hear about some of his ideas close-up.

My point is that as one of this current generation of entrepreneurs, I feel incredibly privileged to be able to learn from other people’s successes and failures at close hand – this really wasn’t possible ten years ago.

Lessons learnt from recent research

Another well-respected speaker at Business of Software 2009 was Don Norman, famous for his insightful classic The Design of Everyday Things. Norman, despite turning 75 this year, is highly active in the field of user experience as both university professor and independent consultant. (I hope I have his energy as/when I make it to his age.) In his talk ‘Ten rules for successful products‘, he introduced the audience to the concept of “Systems Thinking” in terms of delivering product. He discusses these ideas some more in an article entitled Systems Thinking: A Product Is More Than the Product he wrote for interactions magazine. My takeaway from all this is that we so often think of a software product in terms of the bits that get installed onto the user’s machine (or that are hosted in the case of SaaS), but his point was that successful companies take a much more holistic view.

Take Apple, for example. It’s quite instructive to watch the first iPod launch video. At the point that Apple released iPod, there were plenty of MP3 players in the market, but in pretty much all cases, the big issue was getting music onto the device. Recognising this, Apple didn’t just launch an MP3 player, they provided the customer with a complete portable music solution, tying together the purchase and download of music through iTunes to its subsequent enjoyment on the device. The Amazon Kindle story is very similar – there are plenty of e-book readers out there, some arguably better, but Amazon have delivered a complete electronic book solution for their customers, one which is designed to work world-wide.

Coming to grips with this concept, I started to wonder how it could have hypothetically been applied to my previous business, to see what we could have done differently (i.e., better). We provided business to business connectivity software to the financial market community and we took a decision very early on that as product businesses scale much better than service businesses, we would get out of the consulting space and focus on product development. On the face of it, this makes sense – if you have three developers that can either consult or build product, then long-term, you get much better leverage from them building products that can be sold to dozens of customers than you do from them working on specific customer projects. However, the logic is slightly flawed, as we found out as we attempted to grow the business.

In our business, it was all too often the case that prospects needed some small tweak or some little piece of integration undertaken in order to make use of our product. (Generally they were willing to pay for this.) Had we taken a more holistic view of our business, we would have seen that providing such a service alongside the product would have strengthened the overall offering, as customers would have got a complete solution to their specific problem, rather than a piece of software and a whole new set of problems.

Going forward, what have I learned for my new business? The key lesson is that providing a piece of software, even if it is reliable, easy to use and comes with great customer service, is still not enough. We need to look beyond the raw bits to the heart of the customer’s business problem, and by taking a holistic approach, find ways to add value by gnawing away at those same problems. This could be through an accompanying integration service or perhaps finding some way of helping them with their customer’s problems. I have no doubt that seeing the solutions we provide as a form of eco-system rather than a raw product is a sure-fire way to build a more successful business. To quote Don Norman, “No product is an island“.

Have you come across other examples where “systems thinking” has really made a difference to business? Is this something you’ve experienced yourself? Please leave a comment and let me know.

There have been some interesting developments in the week since my last post. About ten days ago I stumbled upon a need at one of the firms I worked with in the past. I decided it was worth exploring so I spent a few days and evenings (though not nights anymore – I’m not as young or crazy as I once was) building a prototype to demo to some people I knew at the company. (As it’s early days yet, I won’t say too much about the problem or the solution at this stage, although I’m absolutely committed to doing so at the earliest opportunity.)

I did the demo today. I put a lot of effort into the prototype, so I think the audience was reasonably impressed. We chatted some more about the problem and possible approaches to solving it, but we didn’t reach any real conclusion.

I’m not sure what I expected to happen next.

During my time at Reuters, I had the privilege to work with a few great salespeople and one guy I knew always took a filled out purchase order to every sales call, ready for the prospect to sign the moment the opportunity presented itself. This morning certainly wasn’t one of those moments. However, I did get the green light to do a bit more research by talking to other market participants about the idea’s viability and then to report back in a couple of weeks. This might not seem much, but given that there are other much more substantial players in the frame to provide a solution, I consider this a very positive outcome.

As anyone who has sold for a living knows, selling is a lot about handling objections. When you are starting out in a new business, the objections come thick and fast:

• How can we possibly buy from one man in a garage?
• If I buy from you, how do I convince my boss that I wasn’t being foolhardy?
• How do we know that your little business will still be around in year’s time?
• What will our customers think about us using such a small supplier?
• … and so on.

(In fact, these are all variations on the well-known theme, “Nobody ever got fired for buying IBM“. )

In short… … why should we take you seriously?

In my first business, we attempted to handle these objections by pretending they weren’t true. The day a prospect visited as part of our first enterprise product sale, we persuaded a number of friends to sit at the normally empty desks in our office, to give the impression of being a more substantial firm than we really were. (I read somewhere that Charles Wang did the same for an IBM visit in his early days). I could do this again, but I’ve come to believe that in this situation, honesty really is the best policy.

The Flip-Side

In one of the great essays on his site, Paul Graham talks about the advantage that start-ups have. He proposes a notional productivity factor of 36 times the average corporate employee, based on:

• Working twice as many hours a week with three times the focus (6x)
• Eliminating the impact of the pointy-haired boss (2x)
• Being smarter than the average job expects of you (3x)

(Thanks to Oli on the Answers.OnStartups.com forum for pointing this one out.)

Even allowing for the fact that I don’t anticipate working 80 hours a week (due to the aforementioned age considerations, and I doubt I’m truly 3 times smarter than average), the point is simply this: Small companies enjoy a significant advantage over average mid- to large-sized corporates. What does this mean then for prospective customers?

• It should cost them less to get the same things done
• They should get far more innovative solutions to their problems
• They should get solutions faster, i.e., better time-to-market

It’s also worth pointing out some other factors that can influence buying decisions in favour of start-ups:

• They generally have to deal with far fewer internal conflicts of interest (- with a larger supplier there is always a chance they will have their own product or service where their interests are not perfectly aligned with those of your prospect)
• They have much lower overheads (fewer mouths to feed) so again total solution cost should be lower
• They tend to have less stuff on the go at any one time, and can therefore give a project more individual attention and focus

The goal then is to get buyers’ eyes off the negatives and onto the positives. It obviously helps if you can show a prospect how you’ve saved an earlier customer money, improved their time-to-market or delivered a more innovative solution. (Sadly this isn’t an option open to me right now.) In this context, if you can afford to, it sometimes makes sound business sense in the early stages of a start-up to subsidise a piece of business, just to get a good reference customer onboard (although be wary of being sucked into a long-term subsidised relationship). Another approach is to identify and offer a capability/feature/service that it would be next to impossible for your larger competitors to provide (for example, because it stands outside their core business focus or is beyond their technical competence).

Strategy for Success

So having established that there are a lot of benefits in working with smaller companies, what about the obvious downsides? At the root of the objections listed above is the issue of risk; the unspoken question is what could go wrong here? This might mean personal impact (e.g., could a bad buying decision affect my future career prospects?) or it might mean corporate impact (e.g., if this doesn’t work out, where is that going to leave our business?). Here are a few things you can do to minimise these risks in the mind of the buyer:

• If possible, target lower profile projects – attempting to provide a mission-critical solution without the required support infrastructure is a sure-fire way to lose plenty of hair (check out the About page if you don’t believe me…)
• If the customer has in-house development skills, provide a source code licence as a matter of course
• Enlist the support of other credible market participants – whether that is people that are well known in your industry, or even the buyer’s customers if you have such relationships – often you can find a hook to bring those kinds of people in, typically because they stand to benefit in some way (e.g., kudos, improved service, etc.) by your success
• If you have other relationships within the buying organisation, leverage those. Obviously do so with extreme care – you don’t want to stamp on anyone’s toes, but clearly if more than one individual in the firm is bought in, then the decision will seem much less risky

This is none other than the archetypal David and Goliath story. One of the reasons for David’s success was that he wasn’t afraid, despite the towering stature and impressive track record of the giant. David’s nimbleness and single-mindedness meant he was able to take on the enemy and come out victorious. If you are part of an early stage start-up, you have those same advantages!

Have you found other ways to help minimise risk for your customers? Are there other ways to leverage your size I’ve missed? Leave a comment and let me know.