Wednesday, February 8th, 2006
What’s the big deal?
You don’t have to be big anymore. Everyone remembers Boo.com. They raised 130m and have nothing to show for it. Now, you don’t need to be anymore and that’s a huge change. It’s changing the entire landscape of the market with a team of 1 or 2.
So why now? Why hasn’t this happened before? Couple of basic reason: broadband is widespread; people are more comfy with web apps like Gmail; hardware is dirt cheap, don’t have to spend 5m on one Sun server like Boo.com did; open source software so there’s no need to go for an expensive .net platform.
Mass market, 1000+ users. Meant to be apps used by 1000s of people. Not necessarily a lot of disk space or bandwidth but should be able to handle a lot of people.
What’s ‘on a budget’?
Under 30k. Minimum you can bring an enterprise web app to market today on. If Carson Systems can afford it, then you can too.
DropSend is used for sending and storing large files. Common problem - can’t email a 10meg file, can’t explain FTP. DropSend is the answer to that. Can store large files online.
It was a problem that Ryan had.
95,000 users in under two months. Five colo servers in San Francisco. Desktop apps for Mac and Windows. Have an API which will be released soon. PHP, AJAX, MySQL.
The most important thing
Make sure your idea is financially viable. use common sense, will people pay for it? Be cautious about your projections. A lot of guesswork. Acquisition my ass - aim for profit from the beginning. Acquisition is not a sure thing. If you don’t know it’s going to happen then you are betting a lot on that and it’s not smart. If it happens, then great. Forget about the whole ‘is this another bubble’ crap.
Once you’ve decided that your app is financially viable, set a budget. We had a hard time with this. How do we know how much this costs? We’ve never done it before.
So budget depends on project, but I’m going to explain about DropSend and be really honest about figures.
Branding and UI Design: £5,000
Slightly cheap, but did a deal with the designer and got a friend bonus, but our designer went to Bath, lived at our house and did it in a month. If you get UI wrong you’re screwed, but if you get it right then you’re sorted.
Good deal, pretty cheap. Offered a small percentage of equity in the product instead of a higher price.
Desktop apps: £2,750
Found someone who did Win and Mac, but next time will find specialists.
Really good deal. Guy was amazing, nice semantic code, not telling you who he is.
Hosting/Matinenance: £800 per month
Can afford outages. They’re not great, but difference in cost of having an app that’s up most of the time, or up 99.9% of the time is huge, so ‘most’ was fine. The hosting co helped architect the system, put it together, deploy it, and maintain it. Still cheap. That’s for five boxes. If you have one box, you don’t need the same services.
VAT, invoices, integration with Quickbooks, etc.
Linux specialist: £500
To set up the dev box, virtual host etc.
Taking a trip, laptops crapping out etc.
If you spend time on your branding then you want to trademark your logo. Simple. Don’t need a lawyer unless you’re worried about a conflict. Do it early, before your finish your branding.
Merchant Account: £200
NatWest said taking recurrent payments was too risky. So had to go with Halifax-Bank of Scotland.
Payment processor: £500
Need to make sure that you have cashflow. So Carson Workshops funds DropSend, because it’s hard to work full time on a web app without bringing any income in.
So the reality of this is that it took us a year to save the cash. Carson Systems is 2.5 years old, and for the first year I worked my ass off to save up. If it does take you time, you can spend that time learning, picking up tips, maturing as a company.
How to build your team on a budget
You need good people but you can’t afford them. Couple of ideas - go for rock stars, go for quiet talent. People who are well known are expensive and busy. So find someone that you trust, someone who is not well known but good. They’ll be cheaper.
Offer a percentage of equity (2 - 5%), so if you get acquired you give them a %.
Ask people for recommendations. If you work with someone who’s crap, it’ll cost you money because you’ll have to redo all their work. You can outsource. We tried India, initially. All the dev for DropSend was supposed to be done in India, but it didn’t really work out for us. Some of it was down to my inexperience as a manager.
Scalability on a budget
Crux of the issue when it comes to doing enterprise web apps. You have to be able to support a large amount of users but to start with you have no hardware to do so.
Buy just enough hardware to launch. Basecamp launched with one server. We were originally thinking about getting IBM blades, but it was stupidly expensive. But wait to see if your app is successful before you throw money at it.
Build scalability into the architecture of your software. Hard to predict, but things like running out of diskspace. Can you just plug in a disk and it’s happy? need to not have to unplug for a week.
Plan, but don’t obsess. I obsessed for weeks, dreaming about hosting, it was terrible. Don’t do that, it sucks. Worry when your app succeeds.
How to keep it cheap
First one is don’t spend money unless you have to. Unless you’re sure you need something, do not spend money on it.
No stationery. We wasted £1000. Dumb.
No shiny new machines. I know you want that MacBook Pro. Don’t do it. You don’t need it. I survived for a year on a crappy beige PC with a CRT monitor that took up half the room.
No luxuries. When you have the cash, spend it, but in the meantime bite your lip and survive.
No frou-frou features. We had lots of ideas but the more ideas you have the longer it will take to developer, the more expensive it is. Launch with fewer features, but launch quickly. when you do launch your product is going to be easier to use. Less features is good, in general. Obviously it has to work, it has to do something.
Before you spend £25, ask yourself if you have to.
Make deals. Give a small % away. Barter, e.g. offer free advertising to your suppliers on your blog. Us IM [and VoIP] not phone calls. Do as much as you can yourself. All the wireframing I did myself in Flash. I did all the bookkeeping and copy writing.
Shop around. First quote for hosting was £12,000 a month.
Pessimism has its place
You will go 10% over budget
You will go 3 months over schedule
Solution? Plan on it, put it in to your cashflow.
Holy crap! Lawyers are expensive
Terms of Service £1000
Can’t copy someone else’s service agreement. Need a Terms of Service.
Contract for freelancers, £800
Can’t just run on trust
Clickdocs, which are legal docs which are dirt cheap. Can also get a ToS for your website if you want to.
Barter with your lawyers - every lawyer needs website. They always give you a one hour consultation, so always take them up.
Cheap software is your friend.
Basecamp for project management, can get the free plan if you’re only doing one project.
Trac for bug tracker
Skype and AIM for meetings
Subversion for version control.
LAMP or whatever other OS platform you want to use.
Cheap hardware is your pal
£200 Linus box dev server run from the office.
How not to spend money on marketing
Use blogs, word of month, viral. But do it without annoying people. If your app is viral that helps.
Writing. Great way to raise profile. If you have good ideas you can write for magazines. If you write a web app for business, email, say, Business 2.0 and offer to write for them.
What about Venture Capital
If I’m ranting about enterprise web apps and a budget, why wouldn’t you just go with venture capital?
You might need it. I’m not gonna say that everyone should not have VC. If you need to scale or expand very quickly, if you can’t afford to wait that year, then VC is a good answer if you’re willing to give away a huge chunk of your money. But you need a really good reason these days. If you can launch for under £30k, why give away 25 - 30% of your company?
- Don’t spend money unless you absolutely have to
- Bring down the cost of services for bartering
- Cut your features so you can build quickly and get it out the door
- Be realistic, if not pessimistic, about your cashflow
- Plan for scalability but don’t obsess