A couple of Getting Realish ideas spotted in Best Life magazine:
Greg Gianforte is the author of “Bootstrapping Your Business: Start and Grow a Successful Company With Almost No Money.” In Follow Your Dream, he advises throwing out your five-year plan and focusing on building something now instead.
Gianforte describes how to build a company from sales rather than enlisting professional financiers. The secret is to stop sweating your five-year plan and start moving the product from day one. If your business idea requires more money than you have at hand, then shrink the idea.
“An entrepreneur getting started doesn’t need a $100 million idea,” says Gianforte. “A $1 million idea is enough. The beauty of a $1 million idea is that big companies don’t care about it. Find a niche within a niche.”
The same issue of the magazine also includes Mark Cuban’s Three Rules for Building a Company. He writes, “Do everything you can to avoid taking money.”
Sweat equity is the best equity. “Taking money from someone else kills more start-ups than anything else does. Do everything you can to avoid taking money. If you must, your best prospects are potential customers. You have something they want, so if they invest in you, it can be a win-win situation.”
Related Getting Real essays:
Don’t Do Dead Documents
Race to Running Software
Fix Time and Budget, Flex Scope
Fund Yourself
Peter Urban
on 17 Jul 08Here it comes: http://www.smibs.com
building it now, 1 year plan and no outside $
(it replaced hat nice Porsche that I always ‘dreamed’ of – let’s see if it’s as much fun t drive ;-)
Sign up and help us make it perfect in private beta.
Brian
on 17 Jul 08Matt -
Send me an email when you get a second. I own an advertising agency and we are building a very simple version of a online software that could add to your product list and would be a big hit with a wide variety of companies.
Thanks,
Brian
Bill Roberts
on 17 Jul 08This is definitely a good philosophy. Aside from anything else, it’s not really possible to make a 5 year plan that has any bearing on reality, without first releasing something and getting some user feedback.
Nonetheless when we’ve been talking to various people about our startup, I’ve been astonished how often we’re asked for detailed financial projections. My answer has been more or less “I have no idea”. That doesn’t always go down well, but luckily we are not currently trying to raise any external money.
Alex
on 17 Jul 08I do contract work to support my company and launch products early and update often. Even though it means I do the occasional weekend or evening, I’d still rather be running my own show than working for somebody else!
Mason
on 17 Jul 08Haha… I used to work for Greg. Good company.
Don Schenck
on 17 Jul 08The problem is COMING UP with a good idea! ARGH!
Garry
on 17 Jul 08I disagree, ideas are easy! I have hundreds of great business ideas, but no time to implement them. The hard part is focusing and working hard at building something up. Btw if anyone wants to buy some ideas let me know ;-)
Tim
on 17 Jul 08Seems strange to me to hear 37signals state “don’t take any money” when they have done exactly the opposite. Bezos has been an investor in 37signals for some time now.
Does this imply it was a bad decision on 37signals part?
Mark Sigal
on 17 Jul 08Wholeheartedly agree on the throw out the five year plan stuff, as experience suggests that what one thinks is the “dog” often turns out to be the “tail” and vice versa.
And totally, would echo the logic of shrinking the idea to get something out sooner, generate revenue sooner.
As to don’t take any money that is one of those platitudes that is devoid of meaning until you know the context. If you are a marketing type and you need programming resources, that costs money. If you are manufacturing goods, that costs money. It would seem foolhardy to not pursue ideas that require financial resources that may not exist in your pocket.
That said, it is often a crushing moment talking to would-be entrepreneurs who have an idea on paper only, no track record of success and think that they have something finance-able.
Every decision has a cost.
Here’s a post I have written on my experiences (eight startups) regarding essential truths at early stage startups:
Threading the Needle: Essential Truths for Early-Stage Entrepreneurs http://thenetworkgarden.com/weblog/2008/06/threading-the-n.html
Check it out if interested.
Mark
Don Schenck
on 17 Jul 08@Gary: Seriously?? Email me.
ML
on 17 Jul 08Does this imply it was a bad decision on 37signals part?
No, Tim. We still advise people to stay away from upfront funding. We got involved with Jeff Bezos for reasons beyond just cash (e.g. experience, advice, opinions, business sense, etc.). Read this for more details.
Tim
on 17 Jul 08@ML
I read the link. Thanks for providing it. One quick question, it says:
Shouldn’t the VC firm be the person coming to see you. Not the other way around.
Sounds to me like 37signals gave up more than a portion/equity of the company. Sounds to me like it’s founders/employees gave up control.
That’s in the figurative or literally (ownership) sense.
EH
on 17 Jul 08That’s in the figurative or literally (ownership) sense.
It’s good to cover your bases…
JF
on 17 Jul 08Shouldn’t the VC firm be the person coming to see you.
Jeff’s schedule demands are more complicated than ours. We were happy to go to Seattle to meet with him. He’s since been to Chicago to meet with our whole crew as well.
Damon Cali
on 17 Jul 08I don’t much like this advice because there is no good generic answer (surprise!). I can think of many great, profitable businesses that shouldn’t be done without large upfront investments. If you’re always thinking small, you can miss the big stuff.
Web apps, of course, are damn near free to launch. Power plants, not so much. Real estate nearly always benefits from sane levels of debt (the forgotten financing option).
(check my blog above for a couple recent posts on why I decided to bootstrap if you’re so inclined.)
Damon Cali
on 17 Jul 08If that happens, you REALLY don’t need the money…
dMix
on 17 Jul 08I think it’s detrimental to give advice without clarifying the type of businesses it is targeted at. Some business opportunities are VC fundable, although most aren’t. The main thing is knowing the difference.
Reading “do everything you can to avoid taking money” could kill the potential of a lot of companies that DO have high growth potential, but instead they chose to “keep it small”.
My response: http://dmix.ca/2008/07/a-rebels-answer-to-vc-or-bootstrap/
Fred
on 17 Jul 08I had to comment after reading the comments. I’d take Gianforte and Cuban’s advice seriously. Unless you are supremely lucky, you’ll need to heed it.
There are reasons that you will see later, hopefully not because you took money too early. Because it will likely kill your venture, even if it has legs.
I’m not a shill for either. Entrepreneurs who have done it before will know what they’re getting at. Besides, there is nothing wrong with building a software company the old-fashioned way – with customers.
Frank
on 18 Jul 08@Jason
If Jeff didn’t have time to meet w/ you at your offices in Chicago prior to the deal, what made you think he would have/make time to spend giving you the advice you so desperately were seeking after selling a portion of your company too him?
Gregor
on 18 Jul 08[“A $1 million idea is enough. The beauty of a $1 million idea is that big companies don’t care about it. Find a niche within a niche.”]
$1 million is (unfortunately) not my conception of bootstrapping !...
Engago team
on 18 Jul 08The main problem is: You need to build the company and still have money for food. Between the idea and the first money coming in there is a time span of months, even years. So how do you bridge this time span?
- Consulting work on the side to pay the bills
- Keep work and work evenings, at night and weekends
- Take funding from VC’s
- Sell car, home
Read about The ice king Frederic Tudor http://en.wikipedia.org/wiki/Frederic_Tudor He had a good idea, but success wasn’t immediate, still made it to become rich.
Matt
on 18 Jul 08@Gregor…I’m pretty sure that the $1 million isn’t the required startup funding. It’s the possible return.
DanielR
on 18 Jul 08Launced photoree.com 8 months ago, and still running on love money. Up to now, no real need for outside funds so I’ll stick with that as log as I can.
PS: thanks for “Getting Real”!
Wade
on 18 Jul 08I agree.
I’d been nursing pie-in-the-sky business ideas for years, but my partners and I finally built, and launched, http://200nipples.com (sfw) in about 8 weeks.
We’re into it for a $1000 or so and we’ll be profitable by next week.
(We launched on June 16th: about 1 month ago.)
This discussion is closed.