The startup world is full of people addicted to work. The addiction often carries a heavy toll of lost friendships, broken relationships, bad health, and a dearth of other interests. All that matters is the next high from work. The next deal, the next milestone, the next round of funding.
If you had a similar addiction to cocaine or alcohol, people would call you sick and ask you to get help. But in the startup world, this addiction is praised by many. You’re a hero for putting in all your chips of life for that off chance that you’ll hit a royal flush.
What’s worse is that most of these addicts know intellectually that plowing through 14 hour work days is not actually a very productive way to get ahead. That more time doesn’t mean more valuable work done. Jason Cohen addresses this in Sacrifice your health for your startup. He recognizes that sleep deprivation is not helpful, but still sees it as a badge of honor. That the extra work is probably not quality product, but somehow still needs to happen.
He talks the talk of reason but walks the walk of an addict. Desperate to find a justification for his ways: You need to be nothing but work because you have to wear many hats. You need to have a single-tracked obsession with work because the nirvana of “financial freedom” is just a few highs away.
Being addicted to your work might be slightly better than a coke habit, but it follows the same pattern of abuse and escapism. And most importantly, it is not a requirement for success. You do not have to become an addict to run a startup. Be passionate, be obsessed, but don’t let it be an excuse for consuming your life.
CHICAGO—September 24, 2009—37signals is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1.
Founder Jason Fried informed his employees about the new deal at a recent company-wide meeting. The financing round was led by Yardstick Capital and Institutionalized Venture Partners.
In order to increase the value of the company, 37signals has decided to stop generating revenues. “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up. That’s why we’re switching to a ‘freeconomics’ model. We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!”
Proof that 37signals is now a $100 billion dollar company.
A $100 billion value for 37signals is “not outlandish,” says Aanandamayee Bhatnagar, a finance professor and valuation guru at Grenada State’s Schnook School of Business. Bhatnagar points to a leaked, confidential corporate strategy plan that projects 37signals will attract twelve billion users by the end of 2013.
How will the company overcome the fact that there are only 6.8 billion people alive today? “Why limit users to people?” said Bhatnagar.
In order to determine the valuation of companies, Bhatnagar typically applies the following formula: [(Twitter followers x Facebook fans) + (# of employees x 1000)] x (RSS subscribers + daily page views) + (monthly burn rate x Google’s stock price)2 and then doubles if it they use Ruby on Rails or if the CEO has run a business into the ground before. Bhatnagar admits the math is mostly a guess but points out that “the press eats it up.”
To help handle the burdens of an increased valuation, 37signals hired former YouTube exec Craig Mirage as Chief Operating Officer earlier this month. Mirage hopes to replicate YouTube’s valuation success at 37signals. “Of course, the investment comes with great expectations. But you should see the spreadsheet models we’re making up. Really breakthrough stuff,” said Mirage.
“37signals will lead the new global movement filled with imaginary assumptions on growth and monetization potential,” he continued. “We’re excited to roll out a list of unconfirmed revenue possibilities that involve crowdsourcing, a robust set of widget creation tools, 3G, augmented reality, social stuff, and an app store. Also, everything we make will include a compass.”
Why should I care? Because I think it’s indicative of a VC-induced cancer that’s infecting our industry and killing off the next generation. I don’t know the full backstory, but I’d bet this sale was encouraged by a Mint investor.
Here’s a fresh new company that was gunning for an aging incumbent. And not only gunning, but gaining. They had a great product, great design, and great potential. They were growing rapidly and figured out the revenue game. They were on their way to redefining an industry — one that was left for dead by the current custodians.
They were everything their main competitor, Intuit, was not. While Mint was inventing, Intuit was out of it. People used Quickbooks/Quicken out of habit and legacy. People used Mint because they loved it. Intuit was disgruntled, Mint was disruptive.
This weekend the New York Times published a piece called Using ‘Free’ to Turn a Profit. The piece focused on Evernote, a web-based and smart-phone based application for taking notes, snapping pictures, and storing stuff you want to remember later. The following critique isn’t about Evernote (it’s an impressive product which a lot of people love). It’s about the incredibly low bar for “success” in our industry and how the tech-business press perpetuates the perception. (ugh, did I just turn into one of those who blames “the media”? Yes, on this one, I did.)
Let’s erase one claim right off the bat. The headline, “Using ‘Free’ to Turn a Profit”, is misleading and downright false as it relates to the subject of the story. Near the end of the piece Phil Libin, the chief executive of Evernote, says they are generating about $79,000/month in revenue. Then the article goes on to say “By January 2011, Mr. Libin projects, the company will break even.”
$79,000/month and they won’t break even until January 2011. So every day they’re losing money until 2011. And the title of the piece is “Using ‘Free’ to Turn a Profit”. What? How can the Times let a headline like this slide?
Then yesterday a piece pops up on Gigaom called How Freemium Can Work for Your Startup. This piece references the “Using ‘Free’ to Turn a Profit” New York Times piece. Om Malik says “And it in reading Damon’s article, the qualities of a successful freemium product finally became clear to me.” Then in the next paragraph Om acknowledges that Evernote doesn’t generate enough revenue to turn a profit. Later he says “I’m sure there are many more ways to build great freemium applications, but one [Evernote] has stood out for me above all the others.” The product may be excellent, but until their business cracks a profit I don’t see how Om can say it’s a model for how to build a freemium application (or a business).
This pattern — “success” based on forecasted future success instead of current success — shows up all over the tech-business press. Instead of metrics like “they make more money than they spend” we see stuff like “user count growth” and “followers” and “impressions” and “friends” and “visits” qualify success. Whenever you see someone piling big numbers into made up metrics, it’s a diversion. They want you to think that this time it’s different. But like Judge Judy says, “If it doesn’t make sense it isn’t true.”
Don’t agree? Would you take your next paycheck in page views? or users? or followers? or visitors? or eyeballs (remember that one from the 90s)? Go down to the corner store and plunk down a million impressions for a gum ball. They’ll probably call the cops.
If there was an airline that flew more passengers than anyone else, but lost money on each one, would we call it a success? If there was a restaurant that served more people than anyone else, but lost money on each meal served, would we call it a success? If there was a store that sold more product than anyone else, but took a loss on each one, would we call it a success? Would the business press hold these companies up as business model successes? Would anyone? Interesting, maybe. Promising, sure. But successful? Then what the hell is going on with the coverage of our industry?
What’s the rush? Why not wait until their business is proven? Wouldn’t the Evernote story have been 10x better if they’d actually been able to say “We’re making money with this model. It works.” Wouldn’t the New York Times be doing its readers a service by providing insight into a proven model with a proven example? Instead, we get an article titled “turn a profit” about a company that is over a year away from meeting that definition. There are thousands of interesting internet-based businesses that are actually turning a profit — and I know of dozens running the freemium model that are deep in the black. Pick one and write a great true story. Why all the fiction?
It still blows me away that David’s talk at Startup School 2008 was met with such enthusiasm (I know David was surprised too). The talk was simple. Come up with a product, charge money for it, make more money than it costs to run it, and you turn a profit! This is the formula that’s been in place since business began. Yet in front of a group of new tech entrepreneurs it seemed like a revelation, a brand new story never told before. David said people were coming up to him in droves after the speech thanking him for opening their eyes. Who closed them?
So I guess what ultimately bothers me most about this New York Times piece, and many other pieces just like it (see TechCrunch daily), is the example that’s being set for the next generation of entrepreneurs. They’re seeing business success defined as “the projections say we’ll profitable later”. They’re constantly being exposed to excuses. They’re being taught that profits are these things that only happen one day far away. That’s just wrong.
A great resume will get you not-rejected, a great cover letter will get you hired. That’s the conclusion I’m left with after going through the applications for our junior support programmer position.
Most people can make their resume look reasonable which makes it a poor qualifier. We don’t believe in years of irrelevance, so you’re not going to beat out another candidate by having four instead of three years of experience. That means all you’re left with is just check marks: Yes, there’s Rails experience. Yup, there’s the sysadmin stuff.
Poor qualifiers filter out few candidates. When I’m saddled with 70 applications for a job, I have to make some rough cuts very quickly. I literally have to decimate the pool. With the resume only doing 20% of the job, the key is left with the cover letter.
This means that “If you like my resume, give me a call” doesn’t make the cut for a cover letter. I need more romance and originality than that to pick up the phone.
Strike a tone in tune with the company
It also means that you really have to tailor your tone to the company. Pulling out your Business Serious voice and addressing “Dear Hiring Manager” instantly kicks you down a few levels. Just like showing up in a suit would do when everyone else is wearing jeans and t-shirts (except of course if you have extreme pizazz to pull it off).
The gut reaction builds immediately. If the first paragraph is a strike, the second has to work that much harder. If there’s no hook in the first three, it’s highly unlikely that anything is going to come of it.
This advice is probably exactly the opposite of what you’ll if you’re aiming to get into a big shop with a formal HR department. In that scenario, it’s often last man standing in the numbers game and checklist requirements. Personality doesn’t matter to make it through the first cut.
But when you’re looking to get hired by managers who actually have to work with you, personality is almost all that matters to get to the interview. So beef up your cover letter and let your personality shine (Jason Zimdars who we recently hired set the gold standard).
“I’d love to start a company / become a great programmer / write an awesome blog, but there’s just not enough time in the day!” Bullshit. There’s always enough time, you’re just not spending it right.
Now that’s some tough love, but I’m sick and tired of hearing “no time” as an excuse for why you can’t be great. It really doesn’t take that much time to get started, but it does take wanting it really bad. Most people just doesn’t want it bad enough and protect their ego with the excuse of time.
This excuse is particularly depressing when it comes from students.
“Oh, I have so many classes. Oh, I have so much home work. There’s simply no time to learn outside of school.”
Then you’re doing it wrong!
Never let your schooling interfere with your education, someone clever once said. Being willing to sacrifice at the edges is one of the most important skills you’ll ever learn.
I’ve received plenty of Bs and even Cs for classes that I was incredibly proud of because they came from hardly no time spent at all. Time that I could then spend on reading my own curriculum, starting my own projects, and running my own businesses.
And I did. During my undergrad, I created Instiki, Rails, Basecamp, and got on the path to being a partner at 37signals. Do you think I could fit all that and still get straight As and have lots of time left over for playing World of Warcraft? No.
If you want it bad enough, you’ll make the time, regardless of your other obligations. Don’t let yourself off the hook with excuses. It’s too easy and, to be honest, nobody cares on the other side.
It’s entirely your responsibility to make your dreams come through.
’”Get Ink” is the fundamental marketing mantra. You guys are natural self-promoters. What do you find is the best way of getting your name in the frame?
10 ideas that come to mind when I think about ways to get people to notice you/your product:
1. Provide something of value.
The first step is recognizing that marketing is asking for someone else’s time and attention. You need to provide something worthy of those valuable commodities. So keep your message brief and interesting. When you educate or entertain other people, they’ll pay attention. If you bore them, they won’t.
2. Know your hook.
Imagine you are a reporter who wants to write an article about your company. What’s the hook? What’s the angle that will be interesting to someone who normally wouldn’t care about your software? We’ve got a lot of mileage in the press out of staying small and focusing on “less.” What’s unique about your story?
3. Stand for something.
Know and expose your company’s philosophy and mantras. 37signals started with a manifesto back when we launched as a design firm. Even though it’s from 1999 and our company has evolved a ton since then, you can see the seeds of many of our current ideas there. That sort of belief foundation will help guide you (and others) to your story.
4. Get your face out there.
It’s tempting to think you can do it all from a keyboard. But emails are a poor substitute for real, face-to-face interactions. Go to conferences and meetups, take someone you admire out to lunch, etc. It’s ok to “network” — just don’t be a douche about it. Which leads to…
5. Try to build real, sustained relationships.
Actually be a friend instead of a guy trying to get something. Keep your interactions human (a sincere, honest note will go a lot further than a buzzwordy press release). Seek out ways to help others. It’ll all come back to you.
6. It’s the message, not the amount you spend on it.
Companies that spend tons of ad/PR dollars to convince people their products are worthwhile are like guys who spend lots of money on gifts and dinners to woo a woman. What kind of relationship are they really building? Successful customer relationships are like any other long-term relationship: They start with a foundation of communication and showing you care about the other person.
7. Give stuff away for free.(I don’t think this contradicts the previous point but maybe?) People love free. Offer a free version of your product, provide coupon codes, etc. Whenever we include a coupon code in a newsletter, there’s a big uptick in upgrades.
8. Ride the wave.
Seek momentum and ride it. Is everyone buzzing about the iPhone? Then make an iPhone app. Are people interested in rapid development processes? Then blog about building your app in, say, under a month. Find out what people are talking about already and then figure out a way to get in the picture.
9. Be in it for the long haul.
Recognize that promotion, like other aspects of building a company, takes time and effort. If you’re starting from scratch, you have to claw your way up. It’s uncanny how many “overnight success stories” you hear about are actually people who busted their asses for years to get into the position where something might take off. Don’t expect instant recognition.
10. Be undeniably good.Steve Martin was on Charlie Rose last week. At the very end, he gave his advice to someone who’s trying to make it in any field: “Be undeniably good.”
When people ask me how do you make it in show business or whatever, what I always tell them — And nobody ever takes note of it ‘cuz it’s not the answer they wanted to hear. What they want to hear is here’s how you get an agent, here’s how you write a script, here’s how you do this — But I always say, “Be so good they can’t ignore you.” If somebody’s thinking, “How can I be really good?”, people are going to come to you. It’s much easier doing it that way than going to cocktail parties.
That’s some good advice. Go out and make something that kicks ass and people will notice.
Related: Check out the “Promotion” chapter in Getting Real.
Got a question for us? Please send it along to svn [at] 37signals dot com and use the subject “Ask 37signals”.
Khoi, who’s consistently one of the best writers on the web, recently took a swipe at enterprise software. Who can blame him? We agree.
If you work at a big company and you’ve ever had to do something that should be simple, like file an expense report, make changes to your salary withholdings — or, heck, if you’ve ever tried to apply for a job at a big company — then you’ve probably encountered these confounding user experiences. And you probably cursed out loud.
Then he opines:
I have to wonder: what is it about the world of enterprise software that routinely produces such inelegant user experiences?
My take: The Buyers Aren’t the Users
The people who buy enterprise software aren’t the people who use enterprise software. That’s where the disconnect begins. And it pulls and pulls and pulls until the user experience is split from the buying experience so severely that the software vendors are building for the buyers, not the users. The experience takes a back seat to the feature list, future promises, and buzz words.
This is one of the reasons we think enterprise is a dirty word. It’s also why it’s an absolute pleasure to design products for what we call the Fortune 5,000,000.
The Fortune 5,000,000 are the the small businesses, the side-businessess, the freelancers. The people who buy our products are the people who use our products. If they don’t get value on both the financial side and the productivity side they don’t stick around.
We have to make the money happy and the people happy. In our market they’re the same person. In the enterprise market they are often different people in different departments in different buildings who sit at different lunch tables.
In the world of small business software the product — not the salesperson — does the talking. There’s no camouflaging value when the buyer is the user.
The idea of offline web applications is getting an undue amount of attention. Which is bizarre when you look at how availability of connectivity is ever increasing. EVDO cards, city-wide wifis, iPhones, Blackberry’s. There are so many ways to get online these days that the excitement for offline is truly puzzling. Until you consider the one place that is still largely an island of missing connectivity: The plane!
But planes are not a very common hang-out spot for most people. The two major groups of people who are on a plane often enough to care and have an interest in web applications are traveling salesmen and techies who go to too many conferences.
I used to somewhat belong to latter group. And I too liked the idea of having access to my web applications at 30,000 feet. Then it actually happened. SAS offered connectivity on their transatlantic flights between Copenhagen and Chicago. Nirvana, eh? Hell no. Access to my web applications meant that the one time where I’d actually have serenity to read a book or listen to a podcast or just chill out got sucked into looking just like any other day at the office.
Ironically, SAS killed the internet access on their transatlantic flights this January because nobody was using it. (Well, except for me saying “look, I’m online at 30,000 feet!!” in a chat room). And I think that’s a good indicator for offline web applications. The idea is cool, but the reality is that it just doesn’t matter. You don’t need access to all your stuff all the time. We’re already overloaded with connectivity. Cherish the few remaining strongholds for offlineliness!
(Yes, yes, I’m sure there exists other niches and pockets of dark holes where if only we had access to the GlobalMegaCorpSocialY application, the world would be a better place. I’m certainly not going to deny that. Just that for most people, most of the time, it couldn’t matter less.)
Proof that 37signals is now a $100 billion dollar company.