Our idea of success is all messed up

http://www.carsonified.com/web-apps/our-idea-of-success-is-all-messed-up

by danw • 18 years ago

39 33 18 years ago

carsonified.com

rantfoil• 18 years ago

This is a "me too" blog post echoing DHH's sentiments, but it is always useful to see the model work for more people.

Their example re: dropsend and how they're turning a $200k profit with no additional time or effort is impressive.

jamescoops• 18 years ago

One question i have is how the accounting is done for the $200k profit, bearing in mind the app benefits from the wider business (Carsonified events etc). As a standalone app it might be paying more for marketing, legal/ accounting, management overhead etc

joao• 18 years ago

But for one successful project that he mentions (Dropsend) there are 2 projects of his that have 'failed': - the webapp Amigo -- https://myaccount.heyamigo.net/serviceDown.html -- that he even marketed starting a blog about its build and there was even a quote of O'Reilly talking about an untaped market.. and it's gone - a few years back Ryan also built a subscription based online project manager, before 37Signals launched their Basecamp, and it's no longer around.

Bottom line: he says you can do it to, and he's right, but you have to really know your target market at the start (which he did with targeting Dropsend to the designer/agency market, that he knew well due to his work on BD4D) and have contacts in it to spread the word (at the start, eventually your client demographic expands)... but it isn't as easy as he makes it seem on a blog post based on one of his successes, when that formula didn't work out well for his other projects.

wallflower• 18 years ago

Check out http://barenakedapp.com for Carson's from day zero to launch to sale intimate story of DropSend

yariv3• 18 years ago

The problem when entrepreneurs who created companies like DropSend and 37signals tell us to follow their "stay small/independent" model because it worked for them is that they represent the small pool of entrepreneurs who succeeded doing it. The is a classic selection bias. Although the argument you should stay small and independent and avoid VC money "feels" right, looking at just a few companies who succeeded isn't enough to prove it. I would like to see a real study comparing the success rate of VC funded startups vs. independent ones. It would research the success distributions for both models and highlight which model (small and independent vs. big and VC-funded) has the best risk/reward ratios for the founders. Until such a study is made, I will take the "avoid VC money" advice from those who made it work with a grain of salt.

nostrademons3• 18 years ago

There are studies out there for success rates of VC-funded companies. I read one that had a success rate of 18% for first-time founders, 20% for founders that had previously failed, and 33% for founders that had previously succeeded. Don't have time to dig it up now, unfortunately - it was about the gains from serial entrepreneurship, and I think it was posted on news.YC.

It's much harder - possibly impossible - to measure the success rate of bootstrapped ventures, because the boundaries are much fuzzier. For example, my current venture started with 5 founders (none of whom are still with it) and is now just me. We've launched 3 websites, all failures, and have one still under development. If the new website succeeds, should this count as 5 failures, one per founder that left? 1 failure, treating the original founding team as a failure and me as a success? 0 failures, since none of the other 5 founders quit their day jobs, and so it was just a hobby for them? 1 failure, since one of the other founders committed significantly to this and did a lot of work for it (even while still holding his day job), yet the other 4 didn't really care? 3 failures, one per failed idea? 1 failure, since two of the failures were launched while we were all still at our day jobs? 0 failures, since it all worked out in the end? 2 failures, since the hypothetical success builds upon one of the failures? 5 failures, since there were a couple other hobby projects that weren't intended as startups but might've become so had there been interest?

With VC, there's a clear delineating line between startups. You just go by the corporate entity, which must exist for them to take investment. But bootstrapped startups frequently don't incorporate until it looks like they'll be successful, and often success comes from accidents.

And by many of the definitions of bootstrap failure, the big VC-funded startups are failures too. My first employer (VC-backed) went through 4 business plans in the year I was there. Paypal did too, as did Flickr. Should those be counted as 3 failures and 1 success?

I'm skeptical about any sort of statistical data anyway, because (as with any economic data) the act of publishing that data changes the data itself. If a study comes out showing that you should not take VC money, there will be a flood of entrepreneurs into those markets that can be serviced without VC funds. That'll necessarily drive down success rates, as the market becomes oversaturated, competition drives down margins, and bootstrappers find it unprofitable to continue. Similarly, if a study comes out showing that you should take VC money, there'll be a flood of entrepreneurs into the markets that are considered "hot" by VCs, like what happened in social-networking/bookmarking in 04/05. That'll drive down success rates, companies will fold or be acquired for peanuts, and the next study will say you shouldn't take VC money.

mechanical_fish2• 18 years ago

We've launched 3 websites, all failures, and have one still under development. If the new website succeeds...

If the new site succeeds the whole thing is a success. Who cares about the failures? Certainly not you.

Once you succeed the narrative will immediately fall into place. Your earlier "failures" will turn out to have just been stumbling blocks, correctable mistakes, and/or learning experiences along the road to success.

Which just makes your main point stronger: You can't rationally measure the "success" or "failure" rate of "ideas" until you define "success", "failure", and "idea" -- all of which are arbitrary and vary from company to company, from founder to founder, and from time to time.

yariv3• 18 years ago

You make a good point that I haven't considered. I would define "success" or "failure" as the ultimate outcome of the efforts of the group of founders who worked together on one or more products, regardless any part/full time jobs they had. Having one successful product, no matter how many failed ones, equals success. Having no successful products equals failure. That's just my definition -- feel free to pick a different one if you like it better.

One should be skeptical of any statistical study (didn't you know that 60% of statistical studies are flawed? :) ) but I think it would nonetheless be interesting to analyze a larger data set of startup outcomes to answer the VC funding question.

mechanical_fish2• 18 years ago

Until such a study is made, I will take the "avoid VC money" advice from those who made it work with a grain of salt.

I'm not saying that you're wrong, but you must be eating a lot of salt, because the opposite advice -- "take VC money" -- also suffers from selection bias, despite the eloquent efforts of Philip Greenspun.

This is one of those situations where science lets you down. I guarantee that if you wait around for a real study of any given market, you will forever be ten years behind the curve. (I think people are still just beginning to understand what the dotcom boom of the 90s was really about, for example.)

And when you do finish collecting and collating and interpreting all the data, and you make your Spock-like decision about which path to take... you'll probably be miserable, because it will turn out that the most rational choice is to become an accountant, but you fscking hate tax forms.

Taking VC money is one way to build a company. Angling to be bought by Yahoosoft is another way to build a company. Aiming for independence, small size, and modest profitability is yet another way. All of these strategies fail more often than they succeed. The most important difference between them all is probably which kind of failure will make you happiest. All else being equal, I would probably rather fail to build a modestly profitable Basecamp-like app than fail to win a million-dollar VC dice roll... but all else is never equal, so it depends on the circumstances.

yariv3• 18 years ago

I didn't mean to suggest that I'll wait for this kind of study to come out before deciding which path to take, just that very few data points aren't enough to make a strong case that "avoid VC money" is the best advice to give entrepreneurs. Both independent and VC funded ventures have had many successes and failures, and you need to look at more than just a few cases to get a sense of the right way to go.

IMO, if you think you have an idea for a Basecamp-like app that you can develop quickly with no outside investment and sell enough subscriptions to make it self sustaining, go for it. It's probably a safer strategy than betting on a 100mil exit in VC funded company. However, it's also possible that 37signals has picked a low-hanging fruit the likes of which aren't always easy to find and that the "avoid VC money" advice doesn't work for companies that need a longer runway to profitability.

pg2• 18 years ago

Redefining success to have a lower threshold seems a huge (though common) mistake for groups that are currently behind.

There are plenty of people in Silicon Valley working on mundane, income-producing businesses. In addition it has Googles.

Alex39172• 18 years ago

The problem with this meme is that it ignores the fact that success = log(quality). To build a business that has 2,000 paying customers is probably 85% as hard as building the next Google. To the extent that becoming the next Google is more unlikely than that, I'd say it's because once you max out the quality the rest is basically flip-a-coin.

skmurphy3• 18 years ago

The challenge with a VC investment is that it comes with a 5-7 year shot clock, after which they need to liquidate their investment: they don't want to return a minority holding in private firm to their limited partners. Bootstrapping or Angel investment allows you to be more patient about success. Also, the competitive landscape for a $1M revenue firm is very different than one earning $100M, it's much much harder. Very few larger firms care about a $1M market, or even a $10M market, especially if they view it as an unprofitable segment from their current revenue. But they will find a $100M market much harder to ignore.

hacklite• 18 years ago

I wouldn't even say building Google was that hard -- wasn't it mostly done by Larry Page to start with?

aswanson2• 18 years ago

success = log(quality). To build a business that has 2,000 paying customers is probably 85% as hard as building the next Google.

Not to say that you are wrong, but what data do you have to justify that statement?

JohnN2• 18 years ago

I think it all depends on your definition of success. Many of the hackers on ycnews seem to want to make money so they can do something else. Becoming financially successful is just a step towards allowing them to concentrate on a passion without worrying about monetization.

In which case it would seem logical to make x million the quickest and easiest way possible. I think many will agree its easier to do that building "mundane, income-producing businesses" than trying to create the next Google. In which case, keep the mundane apps coming...

pg2• 18 years ago

If your goal is to make enough so that you can concentrate on something else, creating a mundane income-producing company is the wrong plan, because it will rapidly stop producing income if you stop paying attention to it.

skmurphy3• 18 years ago

If you define success as founding the next Google then the overwhelming majority of readers on HN will be unsuccessful. The number of "Google class" firms in Silicon Valley is perhaps a dozen in the last two decades. It's akin to defining successful as winning the lottery, because, let's face it, they were as lucky as they were smart.

startingup• 18 years ago

Except that "big success" is a lot rarer than it seems. Mundane success (and a few millions) is actually a lot easier to achieve - practically any very hard working, reasonably intelligent person can get there within 10-15 years, and that assumes 1-2 false starts/failures along the way.

alex_c• 18 years ago

"Imagine ... seeing a deposit of $10 million - right after you’ve been acquired or sold all your shares. [...] OK, now imagine you’ve done the things on your list. How do you feel. Any happier? ... I’d be willing to bet that you won’t actually feel much happier than you do now. You might feel nice for about two months, and then you’ll be itching to do something else. Happiness isn’t found in being the next company to sell for $100 million. So that’s the whole point - you can have a small web app business and still enjoy the good life."

I don't think I'll ever be able to see eye to eye with the people who put forward this kind of argument. Maybe we're talking about different things, or maybe we just see life differently. Maybe it's a lack of imagination, I don't know.

The $100 million, or 10, or even 1, isn't about the number of zeroes in your bank account, it's about freedom. Freedom to scratch my "itch to do something else". With the money, that can be bumming around and travelling, or it can be creating something I enjoy but which is very unlikely to ever pay the rent, or it can be trying to start a second $100 million company, or it can be "a small web app business". Without the money and with a small web app business, it can be... a small web app business.

In other words, running a small web app business is all you need to be happy, as long as what you need to be happy is running a small web app business.

nazgulnarsil2• 18 years ago

that kind of comment also shows you just how little people understand the value of a dollar. If people truly appreciated the range of creative potential that 10 million dollars represented they wouldn't be nearly as dismissive about it.

bottom line: if you're going to be doing the same exact thing whether you have 10 million or not, just give me the 10 mill. I guarantee I won't be doing the same thing.

nostrademons3• 18 years ago

I'd do the same thing I'm doing now whether I have 10 million or not. The difference is that with 10 million, I'd be sure that I could keep doing the same thing, forever. (Or at least until I got bored with it. ;-))

dusklight• 18 years ago

I think it's fundamentally messed up to measure your success based on how much money you make. It reminds me of http://xkcd.com/59/ .

The work should be the reward itself. You shouldn't be creating a product because you think it will make you $$$. You should be creating a product because you think it will have a true and substantial positive impact on the world.

I remember when I visited France, one of the things that really struck me, was the number of shopkeepers I met, who owned their shop, often selling stuff they had a hand in manufacturing, and had decided that this was what they wanted to do with the rest of their lives -- to create something beautiful and share it with others who could appreciate them.

nazgulnarsil2• 18 years ago

the american people are a fearful people. they don't want lifestyle jobs, they want jobs that they will be able to get rich at so they'll have financial security.

Is this attitude because they know that if you get old and have no money in america there will be no one to look after you? I don't know.

Our idea of success is all messed up

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