As venture capital dries up, tech startups discover frugality

http://www.latimes.com/business/technology/la-fi-tn-tech-downturn-20160429-story.html

by lxm • 10 years ago

65 57 10 years ago

puranjay• 10 years ago

About damn time.

faraggi• 10 years ago

I might be generalizing, but I get the feeling this is how world-wide start ups have operated for a long time. The reality I've seen (in France and Chile) is quite different from what I've heard of Silicon Valley Startups.

zeemonkee34• 10 years ago

There's lots of talk in there about office space and perks like ping pong tables and beer on tap and the like.

I wonder however if "frugality" might extend to software development practices - for example, we're not going to rewrite the frontend in ReactJS this month because it's working fine as it is and we need to concentrate developer time on new (profitable) features.

In other words things like "JS fatigue" (not pointing at JS in particular) are symptoms of over-staffed, over-funded teams looking for things to do.

leetrout3• 10 years ago

I would caution a counter point that this wouldn't be a bad thing if it were reducing technical debt or improving automation. Of course, you did say avoiding it if it were working fine, but sometimes things that work fine still end up having a lot of impact on day to day routines and ability to get work completed.

I'm focusing a bit more on devops so naturally I would defend my point of view and job security but I think if you have some balance in there with regards to rewriting something to reduce technical debt in some fashion would be OK.

But I'd venture a guess that lots of organizations have to find that middle ground between building constantly vs remodeling / improving the foundation.

zeemonkee34• 10 years ago

"Rewriting something to reduce technical debt" is the kind of nuclear option you would use if you had money - or developer hours - to burn.

Technical debt is better managed through gradual refactoring as part of the normal development processes. Of course there's still going to be a struggle between taking time to maintain code quality and sales wanting the next feature yesterday, but it's a different argument than "we want to rewrite this in shiny new framework X because someone on Hacker News said so" (not that this exact argument will be used, of course).

Automation I'd see more as a sensible move, if it reduces costs in the long term. Again it may take a back seat to short term priorities, particularly when cash is short.

jldugger• 10 years ago

But I'd venture a guess that lots of organizations have to find that middle ground between building constantly vs remodeling / improving the foundation.
I'm focusing a bit more on devops

Shiny object syndrome can affect all fields.

A dev story: One of the new projects at work is an invoice automation system. For whatever reason, the initial design called for Redis as a key value store, and pgsql for their relational data. Ops already supports a ton of services on a shoestring budget, and Redis isn't currently on the list. I only found out about it when I saw a PR documenting the dependencies; they're now researching whether Postgres's hstore is compatible with their needs. Unconstrained, it's easy to end up with lavish designs that spread ops too thinly.

An ops story: Containers is the big one some ops members won't be quiet about. AFAICT, it provides us no real advantage over VMs, and we're likely to deploy containers on top of openstack VMs anyways. Of course, we deploy a number of open source apps like Drupal, WordPress, and MoinMoin that would need to be re-architected to support things like immutable infrastructure. And it's not like the dev has time to support those, they'd be busy auditing and fixing their own software.

logicfiction• 10 years ago

I've seen this exact case of trying to replace the front end with React. Then the recent economic climate lead to pretty much the entire team getting axed since the pre-existing codebase was working, just messy and not cutting edge.

duncanawoods2• 10 years ago

For real frugality, I'd like to see much more innovation supporting non-collocated teams. The advantages are huge for everyone to work from home: no offices, no commute, recruit from anywhere without relocation. Instant messaging isn't enough. 10 years ago we had always on video phones and such. What is state of the art today?

RHSeeger• 10 years ago

no offices

Don't forget that, in working from home, you do want to have an office; its just a home office. For a lot of people, that means paying more for a home with an office room. Overall, working from home doesn't save money, it saves time (which is, at least to me, worth more than the extra money is costs to work from home).

leetrout3• 10 years ago

Yes, having a dedicated working space is very important. I think when you have people that work remote and cover their own working environment costs it is cheaper for the company on the whole.

But if the company is assisting remote work, e.g. paying for coworking space with an allowance that is probably still cheaper. Consider a team of 10... Even at a $200 / mo allowance for coworking that it still only 20~30% of what it would cost per month for a decent space in most major cities and there's no long term commitment.

So I think when you scale it out for small to medium teams it is cheaper and would be cheaper for a lot of startups that weren't already in a shared space.

akadien• 10 years ago

I've been a remote worker for over four years, and my experience is this statement is partially true. With a laptop and wifi connection, I can work from any location where I am most productive. Spending every day in the same spare bedroom kills creativity, and a laptop can go anywhere that spurs it.

It saves money if you cast off things you don't need, such as an extra car (my wife and I now car share), business casual clothing, eating out, &c, and if you live somewhere cheap. I live somewhere cheap (Louisiana), so I have a house with a couple of spare bedrooms from which to work.

zeemonkee34• 10 years ago

To an extent, but at a pinch I can work on the sofa with a laptop. Peace and quiet are really the most important things - I find it difficult to do "deep" work in a crowded cafe, although I can do some trivial stuff like tidying up code, answering emails and so on.

Depending on your locale and situation, you might get tax breaks and/or company subsidies for a home office and equipment as well.

rebekah-aimee2• 10 years ago

But then all your programmers have private offices, which has been thoroughly established as dramatically important to productivity, as well as a bargaining chip in recruiting the best people.

http://www.joelonsoftware.com/articles/FieldGuidetoDeveloper... (Kind of old, but still applicable.)

Supplying an allowance to rent somewhere with a good workspace or set up an office is still mostly cheaper than renting an inner-city space with private offices... and then you don't have issues with VCs thinking you're burning their money unnecessarily.

was_boring• 10 years ago

Always on webrtc, screen sharing and realtime document collaboration.

There are remote controlled robots with iPad faces, but I think those are more of a gimmick.

So really just evolutionary, nothing revolutionary.

mgkimsal• 10 years ago

Optionally, consider actual co-located teams in cheaper areas. I fully support expanded virtual teams, but there are some benefits to co-location as well, and investing in long-term co-location areas, even in other parts of the US, would be a step towards getting the benefits of both co-location and lower costs. You might even be expanding the labor pool to include some culture that isn't an SV echo chamber (potentially cheap-shot, I know).

morgante4• 10 years ago

The problem with co-locating teams in cheaper areas is that it drastically reduces your supply of labor. A lot of developers already live in the Bay Area and even more are willing to move there.

Relatively few live in Dayton, Ohio (random example) and even fewer are willing to live there.

The advantage of remote working is you can draw from talent all over the world (or at least all over the US) without having to worry about the fact that a lot of people would be unwilling to live in your particular LCOL area.

jondubois3• 10 years ago

That's pretty much what Gigster (https://gigster.com/) (YC) is about.

Developers on Gigster are often able to work fewer hours and yet are more productive - As a developer, you can work from anywhere. It gives you the freedom to live outside of major urban centers where rent is cheaper.

kdamken• 10 years ago

This 1000x. Having an office space might make you feel like a "real company", but then again so will turning a profit. Having your own custom office space can be very expensive, especially if it's tricked out with all the stereotypical Silicon Valley amenities. The funny part is, most people don't care about those and would prefer to work remotely.

So, you're paying more money to make things worse for employees.

Additionally, if you're all in the relative area of a city and really need to meet there are often coworking spaces you can use.

mason55• 10 years ago

most people ... would prefer to work remotely.

I'm really curious about this. I did full remote for about 3 months and I thought I was going to go crazy.

coldcode• 10 years ago

As long as Facebook and Google pay interns and recent college graduates ridiculous salaries, then startups have to match them. As long as they offer crazy working environments with massages and free food and fantasy offices, then startups have to do the same. At least in SV frugality isn't a word.

zeemonkee34• 10 years ago

Sure, but not everyone can get into Facebook or Google. They take the best of the best (we can argue whether that's true or not, but that's the perception). Do startups really need Google-level developers, or just competent journeymen?

It sounds more like startups are outbidding each other, not Facebook or Google.

20years• 10 years ago

This ^

I think startups can be competitive simply by hiring remote. No offices. Trying to manage a slick office space and afford being located in SF is a big overhead. Hiring remote will open up your pool of candidates to people that Google & Facebook can't get.

jonwachob912• 10 years ago

Maybe, just maybe... What a startup lacks in fringe benefits they can make up for in solving real/unique/enjoyable problems ;)

Oh... And escaping corporate BS.

philangist• 10 years ago

But most startups aren't even solving those types of problems. They're building marketing analytics or hr management or food delivery software..

dnh44• 10 years ago

And we should all be really pleased that we're working in a sellers market for our skills. Nothing lasts forever.

superuser2• 10 years ago

ridiculous

Why ridiculous? Why are you rooting for people in our industry to make less money?

jondubois3• 10 years ago

I was really surprised at how expensive a lot of B2B software tools were considering how easy they were to build. Then I remembered that a lot of these companies have to feed hundreds of idle investors, board members, advertisers, landlords, property managers, etc...

Anyway, so I got together with a co-founder (a big open source contributor like me) and we built a cheap realtime pub/sub (push notification) service: https://baasil.io/#!/plans

We are like a tenth of the price of some of our competitors but our profit margins are still ridiculously large. I guess it's because we don't have to give our profits to hundreds of idle investors and board members. We just have to feed a couple of hard-working engineers (myself included).

I look forwards to this new age of frugality and restraint with open arms.

mdorazio• 10 years ago

I would say that most small B2B software companies aren't giving profits to investors, they're giving revenue to operations overhead to support staff that aren't strictly needed, but are nice to have (sales, marketing, HR, larger than necessary dev teams, etc.). Any company focusing on solving a single problem while growing slowly is generally a lifestyle company rather than a true startup in the HN sense, and can be as efficient and profitable as yours.

nickpinkston• 10 years ago

Just be careful you're not ignoring the expensive parts of B2B businesses: sales/marketing/service, customer specific setup/integration/features.

There's a reason why other companies charge a lot and have "fat" orgs.

Also, "leaving money on the table" does no one good. Let businesses with budget pay you money. If anything, the money lets you improve the product for your customers - everyone wins.

morgante4• 10 years ago

More accurately, you don't have to pay a bunch of sales people. Sales is the dominant expense of SaaS companies (many SaaS companies in fact have more salespeople than engineers, especially when you consider that most "support" people are in fact sales).

Baasil looks interest. I've also never heard of it, but I have heard of your competitors—thanks to the marketing/sales which their higher fees pay for.

If you're actually planning to grow a business, you need to cover acquisition costs in your pricing. For many businesses, CAC is by far the biggest expense.

jondubois3• 10 years ago

Yes, true. I do think that generic B2B software services like this should be treated more like commodities. Maybe this will happen as more competitors spawn up.

In my view, paying to advertise such a service is equivalent to a farmer paying to advertise his wheat.

jtmcmc2• 10 years ago

Er just as a point I would say that most often support people, especially in b2b companies, are not sales. In fact there is often an intentional, clear distinction. I've worked support at several companies now and while I've definitely been a resource for sales I was never actually sales driven in any fashion.

dhimes2• 10 years ago

What is a pub/sub service and why would I want one? Would it help with distributed teams? Sincere question (but you shouldn't ignore all sales and marketing!).

tixocloud2• 10 years ago

Enterprise companies don't want to buy software. They want to buy a solution to a problem that they have. In addition to software, they need someone to call upon whenever there are any issues. They also need support in terms of integrating software into their existing stack without red flagging compliance, finance and other departments who have a say in the technology stack. Price is a non-issue for enterprise companies - what they want is a reliable business partner.

jtmcmc2• 10 years ago

I'm confused by your statement. Investors and board members aren't generally paid? These other things like landlords and property managers are a function of size admittedly. Advertising should not be a net loss as well...

PhilWright• 10 years ago

Is there something wrong with my browser? Because looking at the website it is designed for the visually impaired. The font must be something like 72point.

timeisapear• 10 years ago

Where was this general agreement and skepticism about the industry in the comments for Mims' "tech bubble" article yesterday?

noir_lord• 10 years ago

Also virtualpascal is good for this, better language than BASIC and the included IDE is very TurboPascal like.

After that there is Free Pascal and the excellent Lazarus IDE which allows much more modern programming for a beginner in a friendly low friction environment.

As venture capital dries up, tech startups discover frugality

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