Steady profits of a startup are not sexy, zillions of users are.
I really enjoyed the piece written by Jason Fried a while ago for their Signals vs Noise blog where he criticized the industry for having a “too low bar for success” in the startup world. I’ve added a comment to Jason’s post and would like to repost it here to highlight some of the problems with media coverage, users and profits of a startup.
Here goes, my 2 Euro-cents:
I think Evernote is a great business and have a great app, but their up-front costs had to be big – just like Phil said – they have very high fixed costs – especially engineering and management salaries – they have teams for very different apps – Web app, Windows app, Mac app, iPhone app,… etc. It’s like having several apps in one and just one point of sale.
What Jason is trying to say (and I agree 100% with him) is that most of the startups have to figure out way to earn money quickly and profit quickly in order to survive.
My application, Nozbe is a typical bootstrapped startup where I needed to have fixed costs down to minimum in order to profit quickly and be able to re-invest later.
Sure, if I had the money Evernote did (from VC) I’d start with doing all the native apps around Nozbe right from the start, but since this wasn’t the case, I had to embrace the constraints and start with my web app, later invest in developing an iPhone app, later invest in doing a great re-design of Nozbe (Nozbe 2.0) and now I’m investing in a desktop app that will sync with Nozbe.com.
At each stage I have to watch out in order to maintain my fixed costs at a reasonable level and not hire too many engineers so that they eat all my revenues. These are tough calls one has to make.
After all, 37signals is now a 15-man operation and it all happened over time because both Jason and David had to watch out the bottom line and make the decisions NOT to hire so many people right from the start.
My company was a one-man shop, now we are 3 people and 2 more are coming and there are freelancers who also do stuff for us on a per-project basis.
There’s nothing wrong with Evernote – more power to them. Just in a bootstrapped startup environment one cannot invest so much money upfront and has to watch the bottom-line very closely in order to keep rockin’ and rollin’.
I just think that for media 1M users is a better headline even if it’s followed by just $79k/m.
I don’t have 1M users, but I love my app, users and I’m profitable by a large margin so that I can call my “lifestyle business” a “great success” by my own standards… and I’m mature enough to realize that my kind of success won’t make it to the headlines of the New York Times but who cares?
After all, what’s so spectacular about a guy from Poland in Central Europe who is developing a productivity web application that helps people mostly from the USA (across the pond) get stuff done so much that they actually pay for it (some even pre-paid for 3 years in advance!) and he’s passionate about his job and productivity and loves every minute of it… and he’s earning a lot more than a good programmer’s salary in the process?
Yes, I know, average, boring stuff. No media coverage here. :-)
Questions: Which startup or web app you’ve used recently impressed you not by media coverage but by actually offering a great value for a reasonable price? Which web app has improved your life recently? Did you learn about it from the mass media or from a fellow blogger or a friend?