Link to PDF: https://docs.google.com/file/d/0B14i92YeDqMoWmZkemFmZXZlSHM/...
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Think small: The micro startup. By orangethirty@gmail.com
What is a micro startup?
A micro startup is simply a business that is niche-oriented, and mostly driven to sell one product. The focus is to develop a business that does not need much maintenance.
A good example of this is bingo card creator by patio11. The business only features one product, is about a very specific niche, and does not need much maintenance.
What are the downsides of a micro startup?
It does not have the same economic potential as a bigger business. It is not as attractive as building a business that sells millions and millions of dollars.
What are the upsides?
Due to its lower economic potential, and low maintainability, a micro startup can simply be left running in autopilot as a source of passive income. It rarely requires any cost of bringing in a development team to keep it running. Your costs are basically flat and stay the same for long periods at a time.
Another benefit is that the investment requirement is very low. You can run many micro startups off of a simple Wordpress or Joomla install. There is no need for a costly server because an economical web hosting account will almost always do Taxes and legal structure is also better. You can incorporate your micro startup under an umbrella corporation. Thus, any financial loss from a failed micro will benefit you in more ways than being a simple LLC.[1]
There is also no need to bring in Venture Capitalists (Vcs). You will not have to dilute your stake in the business, or have to respond to the sometimes incoherent demands of a VC. There is no time wasted raising investment.
You also get to spend more time doing other things not related to the startup. It will simply not consume your life.
The smaller you think, the better off you will be.
People in Silicon Valley are always talking about changing the world, being innovative, and disrupting markets. That is why they try and build these huge businesses that (mostly) end up lacking a proper profit channel.
With a micro startup you do the inverse. You pick a current market niche, improve on the current offerings, and simply ride along until your sales die. Rinse and repeat. Although this does not sound very interesting, a lot of innovation happens at this level. The constant tweaking at the micro level allows for new products to evolve over time.
Landcade as a live example.
The aim of landcade[2] is to sell optimized online marketing tools. Things like landing pages, and email campaign templates are adjusted to a level where they provide a good starting point for businesses to develop from. Instead of relying in a lot of A/B testing to get the basics down, landcade simply gives you a great starting point that has already been A/B tested. All you have to do is to fine tune them.
Landcade is not disruptive, but it improves on the current offerings. Places like Theme Forrest don't have this sort of product readily available. The business is also not engineered to grow into a multimillion company. It is designed to generate a thousand dollars in profits. Not per month, but during its lifetime.
Could it make more money than that? I don't care what it could do. All I focus is in getting my investment back (of $200) and profiting.
Is building micro startups worth it?
Yes. The reason is that micro startups usually fare better than bigger ones in terms of return on investment (ROI). I run, and have run several of them. Each micro startup has managed to at least double the initial investment amount (including cost of time spent developing the product at a rate of $50/hour).
This is a very smart investment strategy, because it requires small investments that mimic the functionality of compounding interest. You invest $200 on one, profit $800. Then you invest another $200 on another, and profit $600. You made not have made a lot of money in terms of actual amounts, but the ROI is very high. As you gather experience, you are then able to build business that produce thousands of dollars worth of profits from a very low investment. My best personal example (which will remain unnamed) is (producing) set to generate up to $60K on one year. All with an investment of around $1700. Not millions of dollars, but enough profits to allow for a significant improvement in quality of life.
How do you know which micro startup to build?
Another great benefit from micro startups is that you don't waste much time creating a product. Nothing is created from scratch, but improved upon. Landcade improves on online marketing tools. It does not create a whole new type of product itself.
Let's use one of the many ideas I have in store. One of the many problems people have these days is storing personal files. Things like images, videos, and documents. All of the big offerings out there are doing a fairly standard job of serving a very wide audience. But they really miss the mark in serving smaller ones. My idea involves creating a generic file cloud that can be re-packaged/re-purposed for specific niches. Imagine if you were a wedding photographer. Your live hood is the files that your camera outputs. Meaning that you need to store those files in a special place. I would develop a web app that would allow photographers like you to upload your files (following your requirements), and give you other additional functionality that other services don't provide. All of it aimed at catering to your needs. I know what you are thinking. This product could turn into another one where photographers could simply upload and buy the printed images from the service. (which would be another micro startup running in parallel).
The smaller the idea, the more focused it is, the bigger the potential to profit.
How do you market a micro startup?
This is the easiest part. You don't really need to spend that much time (or money) marketing it. The focus is spent on creating key relations within the target niche market, and providing (for a limited time) small loss-lead promotions to drive in traffic. Say a “get a free 30-day trial of the file cloud” specially targeted to photographers.
The really awesome thing about this is that the smaller the niche, the easier it is to find your customers. Wedding photographers are simply a web search away. One simple email campaign can have your micro startup profiting from week one. There are also little to none costs from marketing campaigns, due to how you can do direct 1-on-1 marketing with your niche market.
[1]Talk to your lawyer and accountant. [2]http://landcade.com. Optimized online marketing tools. Has not yet launched.
It would be interesting to hear at least reason why it is unnamed. E.g. is it very simple? Or maybe you don't want to get associated with it too much?
Tip: document everything. Document so well anyone can run your 'micro startup'. You never know when you will get a new idea and want to hire someone to take over your company.
90% of entrepreneurs here think their startup is by no means a "micro startup". They aim high, aim for growth... yet most of them fail, they can't even call themselves a small, lifestyle success.
So aim high, aim to be a "startup". You'll probably end up as a micro-startup as a result.
It feels like so many people are worried about "playing the game" if you will, ie getting funding, creating a "startup" and moving to the bay. To what end? To just make a bunch of money? Everything seems backward. Taking VC funding is but one of an infinite number of ways to sustain a business (keyword: sustain). Personally I don't even think about funding, marketing, any of that jazz until I have a badass prototype that is not only fun for me to use, but gets others excited as well. That feels like what should be the norm to me. It all seems funky when people are thinking of business opportunities before thinking of a product, then seeing an opportunity to make money off of it.
Start listening to the archives for StartUpsForTheRestOfUs.com great information there.
There are also some good talks on microconf.com from last years conference.
Mixergy.com has lots of interviews. Subscribe on iTunes. Andrew is a great interviewer and each interview has at least a few gems you can apply to your startup. Start with the Bidsketch interview lots of good information.
Amy Hoy has great advice as well. http://unicornfree.com/30x500
There are a lot of information you can read through online and lots of interviews and podcasts to catch up on.
After you have caught up on all the information out there you can consider signing up for paid courses.
Consider one of Amy Hoy's one day conferences or her 30x500 class. I haven't signed up yet but I am considering it.
There is also Micropreneur Academy micropreneur.com that you could consider signing up for. Rob gives great advice on the podcast and his website. SoftwareByRob.com so I would expect good results from the academy.
I would recommend to find a mentor. Someone who's done this before to share ideas with and keep you moving forward on your business.
It is a process so depending on your runway you'll probably need to consult part time or work part time as you scale up your startup.
You should also follow Brennan Dunn at planscope.io/blog/ he has lost of good information/ideas.
Follow nathanbarry.com as well.
I have transitioned from my original career over the past 5 years to consulting full time and am currently building my first SaaS app.
This is the talk that inspired me the most start with this one.
David Heinemeier Hansson's startup school talk from 2008.
It's a little dated but very inspiring. https://www.youtube.com/watch?v=0CDXJ6bMkMY
Good luck.
The questions I'm asking myself are more like this: Should I set up a server in my basement or use a service? Will my personal internet provider have sufficient bandwith? (media is involved.) Will I need a lawyer to write the user licence agreement? How much will it cost? Which business type should I use? (I need to balance the liability issue with simplicity.) How will should I set up the payment methods? What potential legal issues could happen? how could they be avoided. These are the hard questions that I feel I need to work on. Most podcast / articles / essays etc don't go into these technical details.
There's nothing inherently wrong with weak technical knowledge. A lack of technical knowledge simply indicates a lack of domain experience. Unfortunately, you're asking these questions on Hackernews, where many (most?) readers are technical domain experts.
Most of your questions indicate that you have weak technical domain expertise. Specifically, "Should I set up a server in my basement or use a service?" is a question that indicates a lack of exposure to the wide technical field of infrastructure. For that reason, I recommend hiring a technical consultant to help you with initial planning and setup.
Here are some quick answers without knowing too much about what you have in mind . . .
Should I set up a server in my basement or use a service? No servers in your basement . . . most ideas can probably be validated with inexpensive shared hosting and you can move up to a VPS and beyond from there as needed.
Will my personal internet provider have sufficient bandwith? (media is involved.) You won't want to serve these off your home based server . . . consider Amazon S3 for your media files.
Will I need a lawyer to write the user licence agreement? How much will it cost? Consult an attorney but typically you can find a free template that is adequate to use when validating your idea.
Which business type should I use? (I need to balance the liability issue with simplicity.) Again consult an attorney but you could start out by forming an LLC or even initially testing your idea without forming a company.
How will should I set up the payment methods? Consider Stripe.com for payments.
What potential legal issues could happen? Consult an attorney . . . all kinds of things could happen.
how could they be avoided? Again, consult an attorney and a mentor.
These are the hard questions that I feel I need to work on. Most podcast / articles / essays etc don't go into these technical details.
There are some technical gems in podcasts but you are going to need an advisor or technical co-founder.
The main thing you'll get from the interview/articles are things like testing your idea, is your niche/product/service viable, building an email list, launch strategy, pricing, selling a product/bundle, marketing, conversion optimization, etc . . . the technical aspects should be one of the easier areas of the startup . . . making the idea happen . . . this would be the responsibility of your technical co-founder and/or developer.
Good luck . . .
I think the abundance of cheaply available technology also expands the scope of what could be considered as a 'micro' startup, given your definition of being one-man-manageable and not requiring outside investments. Consider the technology available today: Infrastructure as a service, database as a service, search as a service, platform as a service, web-encoding as a service, (you get the idea).
Leverage expert service providers, focus on cash flow from day 1 and take control your destiny :)
I see most going for pie in the sky type ventures that often have no sound business model (not always true). While it is true that sometimes they are bought out for a billion or your app will make 100k, it is so infrequent I am surprised more don't go after the low hanging fruit all around them.
Both place strong stress on "manageability by one person" and avoiding outside investments/interference.
Two lesser-known conferences with previous-year videos online are LessConf and MicroConf. Worth checking out.
[2] https://www.hnsearch.com/search#request/all&q=lancaster+...
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