How to bootstrap your company to profitability | Hacker News Reader

How to bootstrap your company to profitability

spencerfry.com

118 pointsspencerfry34 comments

Love this article. If you're going to start a company because you're confident in your technical ability, you can start a consultancy easily; tens of thousands of devs freelance, running single-person consultancies instead of taking W2 from a single company. A small consulting company is a better starting point for a new business than a full-time job.

I totally agree with you. I originally started (a little reluctantly) consulting 12 years ago because we moved from a large city to the mountains so telecommuting-based consulting was a necessity, but now, I would not want to give up my independence. Also, as a consultant you can never lose your job if the economy gets a lot worse (although business can be lean). I have two business ideas I want to pursue, one at a time (one dealing with statistical NLP, and the other taking my old cookingspace app and revamping it more for mobile use for shopping and use in the kitchen).

I think that consulting is a great way to get varied experience, enjoy working with lots of different people, and have flexibility for working on side projects.

The author mentions 10+ years experience at running startups but according to the blurb he's 26.

It also looks like he was doing consulting work to pay the bills between his 3rd startup and Carbonmade... for a full 18 months. That doesn't make much sense to me. How can you first sell 3 profitable companies and then go back to consulting for 18 months while trying to bootstrap a new company?

I can only guess to the explanation...

I also question some of his advice. "Your first dollar validates your product, your business model, and everything else" contradicts my experience. So I'm a little skeptical.

Just because you sell your company doesn't mean you want to invest all of the money into your own startup. It seems like he wanted to make sure Carbonmade had a proven model before he invested additional time or money into the idea.

Pushing that aside, I think a lot of the advice he gives is very relevant and applicable to bootstrapping startups.

Although it would be nice for the health of the startup ecosystem if entrepreneurs put back some fraction of their success into angel investing.

I've actually been doing Internet businesses starting at age 11. But my first real business was at age 16 when I started an ISP, web hosting, and shell service company over the summer. We did very well and made a nice tidy profit on that. But I began by starting and selling small websites (forums, game review sites, etc.).

I then started my second real business at 18 where we sold game server hosting, web hosting, and ventrilo services. This company lasted about a year until I took the web hosting clients, built the web hosting services up, and then sold that to a much larger NYC based web hosting company to pursue what would be lead to my third business. Note the progression in size.

My third business was a voice over IP company for computer game players called TypeFrag. I started that in 2002 during my sophomore year of college, and ran it for five years and five full-time employees all while in college until getting a buyout offer of my 50% share that I couldn't refuse during 2007 when I was 22 years old. During that time, I also launched a software company called GameComm under the TypeFrag brand. That company won first place and $75k during a business plan competition and we hired two full-time guys to build out the software for us. That's company number four.

After selling TypeFrag and GameComm, I started in on Carbonmade when I was 22 and have been working on that since. Carbonmade is company number five -- I say company when it's a registered LLC and cash positive and profitable -- and continue to work on that to this day.

So, technically, I actually have 15 years experience working on the Web, but tend to shorten that to 10, because my first "real" company (not just a small money making forum/review site, etc.) came when I was 16... 10 years ago.

You can see my bio here: http://www.crunchbase.com/person/spencer-fry

How did you and do you decide which services to provide? How do you gauge demand as you're thinking of possible products?

DO NOT DUMP THE MONEY YOU MAKE ON M&A BACK INTO YOUR NEXT COMPANY. LIFE MISTAKE.

If HN supported bold type, I'd have used it there as well.

Having retirement, mortgage, and college funds paid up will make you a far better entrepreneur than a couple hundred thousand dollars of funding ever will.

Hold on there -- I never argued in favor of that!

Then I'm sorry, but it's still worth saying. DON'T BE LIKE ME.

looks to me that Spencer Fry would be a good candidate for Mixergy

I'll email him now.

...and replied. I love the Internet. ;)

Just checked out Carbonmade, the designer in me is in awe.

Excellent presentation of some beautiful content.

well written with good tips, and inspiring

Great article.

To which I'd add:

The only real downside of bootstrapping while consulting is that consulting is a soulsuck, and it's so much more fun to work on your own thing. Or, consulting is so much of a soulsuck, that it depletes your energy to even work on your own thing.

You just have to monitor your energy & passion levels carefully to ensure you make choices that help you keep both balls rolling.

We're doing the same - and I just quit consulting a couple mos ago. It's fabulous to look at my fledgling product, designed just how I wanted to, and know it will start grossing $10,000/mo in just a few more short weeks.

If you're only good when the work isn't a "soul suck", your odds on getting a company going aren't great. The fun stuff is a small fraction of the job. Even when you optimize for "fun stuff". This may be part of the reason Graham keeps saying that the determinant for successful startup people is "tenacity".

Sometimes lack of income is the mother of tenacity.

It's much easier to deal with the soul suck stuff when it's your startup. I'll do unsavory things on my startup (like sales calls or phone tech support) that would be unthinkable for client work.

You tell yourself that, but then you worry that because you have no manager at your startup other than yourself, you think you're tackling the unfun stuff, when really you're subconciously "optimizing" (read: drastically pessimizing) your workload to favor the fun stuff.

That COULD be - but I also found that, after quitting consulting, my energy level & my ability to tackle things shot waaaaaay up. I actually did my back taxes & accounting, which I had not been able to face before.

I think, for a lot of people, when you stop violating your "core value" for the sake of money, it gives you a new lease on life.

I look at it as managing energy. Some things drain energy. Some things give back more energy than they take. Doing work you believe in, even if the work at hand is totally uninteresting, generates energy rather than sucking it.

tenacity is key, but personally, I don't think 'soul suck' relates at all to 'hard work' except in the sense that soul sucking work is hard. 'Soul suck' is almost always a sign that work is being done that doesn't need to be done, or that work is being done in an inefficient manner.

In my space, the major 'soul suck' for most people is phone support and sales. I simply don't provide those services (and I've lowered my prices to compensate)

The thing is, when it's your company, you never have to do something you think is stupid. (yeah, you still do some stupid things, or, at least, I do, but when I notice it's stupid, I stop.) It's completely different from working for some PHB because when a customer gets unreasonable, it's simple enough to simply refer him or her to your nearest competitor.

Sure, you still have to do things that are /hard/ but there is always a clear reason why you are doing the thing, and if you don't think that reason is good enough? you don't have to do the work.

In my space, the major 'soul suck' for most people is phone support and sales.

I've often wondered if it would be possible to offer people a chance to outsource phone support in the small business or startup space?

It would certainly be possible; people do it even. (I don't know of anyone targeting small companies specifically, but there's no reason why it would need to be difficult to setup.) But, it's something that is so difficult to do right that I personally am probably better off not doing it at all. /bad/ phone support, at least for my target market, is worse than none at all. (this is quite different if you target more business oriented and/or less technically oriented people.)

That's the thing about phone tech support; it's cheap and easy to do badly, and really difficult and expensive to do well. You need to look at who your customers are and decide if bad phone support is better than no phone support at all, unless you have more volume than I have and a higher margin than I have.

Just a first-order filter to answer FAQ items might be worthwhile, with messages taken for callback.

a phone faq? Really? when I hit those as a customer I assume that the company in question thinks that 1. I am illiterate and 2. my time has no value.

I mean, sure, I'm a nerd and hate talking to people over the phone. But talking to a machine over the phone is even worse.

The advantage of phone support is it's immediacy. if you get rid of that, you might as well eliminate the phone altogether.

For me, soulsuck comes from futility. I do my best for my clients, and they inevitably demand - at some point - that I do something that pleases their ego, or a committee, or some internal checklist, but that results in my work being less useful, useable, etc for their end users.

As somebody whose passion IS great software, this makes me extremely unhappy. It's like being stabbed in my core value.

I'm not cut out for consulting.

Working on my own thing, on the other hand, always gives me a sense of purpose. It doesn't matter what I'm doing at the moment, or if it's fun. I have a great capacity for unfun work.

But I don't have anybody forcing me to undo great work.

If I turn out to be wrong & customers all ask for change, first it's my choice - and second, if they find the user experience needs changing, I am probably in a position to grow.

My customers use my work; clients rarely consume what they pay me for.

Make sense?

I got the impression that he was touting consulting as a way to implement your product.

If you are a designer and your product is framework for web page design, then using your software in your consulting job is a natural way to give your product some exposure while making money from your design work (not the greatest example ever, but you get the drift).

Intrinsically, your consulting work should be your sales pitch for your product. Or at least that's how it works in my imagination.

I didn't get that sense from the article - but it wouldn't work for everyone, anyway. My consulting work was mostly designing intranets for megacorps (including Bear Stearns), or Twitter/social media visualiAtion/sensemaking art pieces for their marketing depts.

I could turn the latter into a product, but that'd be defeating the point.

Now my work is focused on making small biz software that does a fabulous job and makes people happy.

Product link? I'd like to know what will be making 10k/mo in a few weeks?

I'm pretty sure he's referring to this: http://letsfreckle.com/

Sorry to be nitpicking, but it's Amy Hoy, so it should be "she's referring to this"

My mistake. Sorry, Amy.

What is a greater soulsuck - consulting or a full-time job? I work FT (and PT on my venture) and often wonder if consulting would be a better or worse soulsuck.

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