Aspirations (thoughts from a 37signals podcast)
Posted by thatsinthebook on 21st June 2010
Just listened to a David Heinemeier Hansson talk on the 37signals podcast about “A Secret to Making Money” and generally, apart from feeling like I was being shouted at for 20 minutes, I thought it was a great listen.
The podcast was taken from the Start Up School in 2008, which is a school for programmers and software engineers to learn about starting up. Along with 37signals there were a lot of VCs and big businesses there, all giving their 2 cents. The talk by David, in a nutshell, tried to make people realise that it was not compulsory to have the idea, get a million dollars in funding and have a plan to sell within 3 years to have fun, fulfilling and ultimately profitable business.
The point is that one can be successful by selling a product to a modest number of people at a modest price. By waiting for the idea and shooting for the stars we dramatically reduce our chance of success. By scaling down we also reduce the need for outside funding (and subsequent control loss). I personally would rather run a business that I had a say in and that kept me interested over the next 20 years.
Some facts:
- 7 years is the average to sell a business - so starting out with sale in mind puts your goal a long way away.
- 8 out 10 businesses fail within the first 3 years - I hate this stat, but it does make me think about how I might increase my chances.
- 4000 people paying you £20 / month, is £1m per year! 4000 is not a crazy number.
Creating software nowadays can be just like other more traditional businesses - like restaurants. There are hundreds of same-cuisine restaurants, and yet more still spring up and end up being successful. This is true of software - just because there is already a project management system out there, does not mean that you should not create your own. Maybe your product does something better? If you can get a small segment of the market to use your product, you are on the way.
So, rather than waiting for the idea that nobody has ever thought of, why not create a product that just does it better than the other guy. By reducing our aspirations slightly, we may not need millions of pounds in funding, a VC team that takes control and unrealistic targets, and instead end up with a fun and profitable business that we want to be a part of long term. (Hmm, that sounds good to me!).
Now, I have never been one for discouraging anyone from an aspiration, in fact quite the opposite, but having been in business for a few years now, toning down is definitely starting to make more sense.
You can find the full podcast at 37signals.com/podcast.
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