Warning: Software Startups are Not as Easy as Everyone Says

A few months ago I had a conversation with a successful friend of mine (by successful I mean 29 years old, self-employed, a six-figure income, and two houses in Northern California). He runs a software company.

We were discussing what it takes to be a software entrepreneur and in a moment of self-reflection he said “I’m not as successful as I anticipated. I thought success would be easier.”

One of the Smart Kids
When you’re young people throw compliments at you left and right.

Wash your hands, get a round of applause.

Tie your shoe, get a standing ovation.

Read the Guinness Book of World’s Records cover to cover…well, that will get you beat up by a 6-foot third grader named Chuck…but you get my point.

When you’re young, people tell you that success is easy to keep you from getting discouraged. They say anything is possible if you work hard enough.

As you get older, if you read anything outside of school you know more than your peers. You wind up in classes with prefixes like Honors and A.P. And you begin to feel smart.

At some point you see infomercials that talk about how easy it is to make money investing in foreclosures, your own business, and the internet. But their angle is obvious. (I’ll give you a hint, it starts with “But wait, there’s more!”).

And you hear stories from your unsuccessful Uncle Ned that end with “…and he invented the digital squeegee and became an overnight millionaire. What I wouldn’t give to be him!” Of course, you don’t hear about the thousands of hours the inventor spent working alone in his basement preparing for “overnight” success. That would ruin his story.

The Startup Conspiracy
Your parents, teachers, television, and Uncle Ned have driven into your brain that being smart and having an idea is enough to guarantee your spot on the cover of Red Herring Business 2.0 Fast Company. There seems to be some kind of conspiracy that startup success is easy; that it’s handed out like a lei as you step off the plane at the San Francisco Airport.

But it’s not easy. It’s really hard. It’s a combination of enormous amounts of hard work, intelligence, and luck. Anyone who tells you otherwise is trying to sell you something. Even if it’s just a magazine.

Your 2% Chance
If I read another story about Facebook Apps I’m going to punch someone in their Facebook.

It seems like every time I open my RSS reader I see quotes like this one (from a recent Fast Company article):

“Created in a week by two brothers from India, [their Facebook app] caught on like wildfire, with half a million users signing up in the first 10 weeks.”

This is one of about 20 articles I’ve read on the Facebook Apps phenomenon. Each has numerous examples of apps built in a matter of days that now have huge user bases.

Super poke your friend!

Throw a sheep at your friend!

Throw virtual poo at your friend!

That’s not luck, it’s pure genius…really.

An enterprising developer reads these articles and thinks “I want to write an app that gets half a million users in 10 weeks. I’m going to do what they did!” So she spends a week in her basement and cranks out a Facebook application. When she uploads it she finds a few thousand users and not enough monthly ad revenue to buy a Frappuccino. Why is that?

Because the vast majority of the traffic (87%) goes to 84 of the 5,000 apps currently on the platform. That’s less than 2%. Not one of the articles I’ve read has mentioned this ratio, or the enormous luck factor involved in creating a “successful” Facebook application.

Luck out the Wazoo
I can hear someone out there thinking:

“What about HotOrNot.com and PlentyOfFish.com? Their founders make money hand over fist, they don’t appear to be exceptionally gifted, and didn’t put in much hard work. It was easy for them…”

Hot or Not and Plenty of Fish are the poster children for generating huge sums of money with little work (if you’re not familiar with them, they are two dating sites that became smash hits “overnight” and make their owners millions of dollars per year for around 10 hours of work per week).

If you listen to their stories and compare the amount of luck to the amount of skill and hard work it took for their sites to succeed…the amount of luck is astonishing. Not only was their timing absurdly fortuitous and their ideas not exceptionally creative, but the sites were quite easy to build. They both seemed to walk into some kind of weird anomaly in the fabric of time that happened…as best I can tell…exactly twice.

If you think all it takes to build a software company is a nice website, a pretty application, and a link from GigaOm…please reconsider.

The web is littered with applications launched by people who thought it would be that simple. They read about Hot or Not, built and launched an app, received a link or two from an A-list blogger and when money didn’t start rolling in they called it quits. Now they’re selling their labor of love on Sitepoint.

Don’t let this happen to you.

The Bottom Line
There are exceptions to the rule that software startups are hard. But if you plan to succeed with an idea like throwing virtual sheep, you’re better off spending your 40 hours of development time as a paid consultant and buying lottery tickets with your earnings.

If you want a chance at succeeding you should stay far away from trying to duplicate the “one in a million” stories. You’re chances of success are at least an order of magnitude greater with a boring idea like bug tracking or invoicing software than with the next “hot” consumer website. Just ask the zillions of free dating sites that launched after Plenty of Fish hit it big.

You can spend your time dreaming of success and thinking that if you just had one brilliant idea you’d make millions, grace the cover of Sexy Startup Magazine, own a vegetarian-friendly Ferrari, and have that beautiful trophy husband/wife. Or you can put your head down, become an expert in your field, work your ass off, and someday, maybe…you’ll have a taste of success.

[tags]start a software company, startups, success, web 2.0[/tags]

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26 comments ↓

#1 Ben on 11.06.07 at 11:18 am

Thanks man! Love the post!

#2 MattyJ on 11.06.07 at 12:57 pm

Excellent article, Rob.

For further reading, I highly recommend Start Up by Jerry Kaplan. It’s a little outdated (in Internet terms, being 10 years old) but well worth the read. Goes to show that you can have the best product and all the luck in the world, and still not make it.

http://www.amazon.com/Startup-Silicon-Adventure-Jerry-Kaplan/dp/0140257314/ref=pd_bbs_sr_2/103-7428204-3528641?ie=UTF8&s=books&qid=1194371683&sr=8-2

-mattyj

#3 Gregory Kiefer on 11.06.07 at 1:02 pm

Good post. I guess you should cancel your subscription to entrepeneur magazine. They claim that every franchise is a success, everyone gets rich quickly….

I agree with the basis of your article. Starting a business and maintaining it takes a lot of hard work and a lot of smart committed people.

#4 JD Conley on 11.06.07 at 1:22 pm

Yes, it’s definitely hard. After 5 years working on my last one I can attest to that! I’m currently recuperating a bit and doing some consulting while I widdle down the list of grand ideas for another company that might be profitable. It’s also been my experience that people who scheme to make the quick buck don’t get it, but as you say, the truly successful 40 hour products of this day all happen by accident. Most (such as craigslist, facebook) started out solving a real need and evolved into the phenomenon they are today after years of hard work by the founders. Solve a real problem, make a real product in a real market, and don’t chase get rich quick schemes unless you have a lot of time/money to waste.

#5 Gregory Kiefer on 11.06.07 at 1:24 pm

I agree with JD. We are experimenting with a number of new product solutions as well. Definite business problem, but not necessarily a burning problem. I’ll keep these thoughts in mind as we move forward with other ideas. No shortage of ideas though.

#6 Mooch on 11.06.07 at 2:51 pm

I myself have a hard time not dreaming that my idea for a site is just as good as the other overnight successes.

I’ve actually found it useful to post a question on Amazon’s Askville, that asks users if they would use the site if it existed. You’d be suprised what kind of non-biased feedback you’ll get. Askville users do the research of 10 men.

I have quite a bit of free time right now, and am debating on whether or not to drop the hammer on one of my ideas and start designing. It’s stressful stuff.

#7 Rob on 11.06.07 at 3:24 pm

@MattyJ – Thanks for the recommendation. It’s now on its way from Amazon.

@Mooch – As you’ve pointed out, spending a few hours doing market research can keep you from wasting hundreds of hours building and launching a product.

The flip side is that market research can go too far, and at some point you have to trust your gut. It is more of a judgment call than some would have you believe.

But I truly believe that building a product “blind” based solely on emotion is, as I’ve learned from first-hand experience, a very risky proposition.

#8 Day 7 : An Experiment in Scotch on 11.06.07 at 6:21 pm

[…] Only slight improvements over yesterday’s productivity in that I wrote a tiny bit of code today and spent a decent amount of time brainstorming. My plan to not surf the web any until late in the day was not implemented at all. I believe that I am addicted to the internet. However, while most of the internet is ridiculous cruft, occasionally you find a gem. […]

#9 indiejade on 11.06.07 at 10:02 pm

“If I read another story about Facebook Apps I’m going to punch someone in their Facebook.”

A beautiful sentence. Me, too.

#10 Karel on 11.07.07 at 2:03 pm

I wrote Inside Facebook (fbbook.com) saying exactly the opposite, that right now the low cost of entry makes doing a startup easier than ever. Yet I agree that a huge amount of commitment is necessary to getting attention in the web2.0 noise.

I ‘ve created the “I Am Entrepreneur” app, check it out if you like, to see whether you have entrepreneurial traits. And no, it isn’t making any money yet.

The Facebook app environment is a land grab at this point, so I encourage everyone to get their pinky or big toe in now, and just keep it in.

#11 Rob on 11.07.07 at 2:47 pm

@Karel – I’m going to talk about this in a future post, but the low cost of entry isn’t really an advantage since everyone is experiencing it at once. Whom do you have an advantage over when we can all build the same website in the same amount of time and host it for the same amount of money?

As always, winning in this game comes down to building something unique that is also difficult for others to build, marketing, and luck.

#12 links, ideas and geek stuff » Blog Archive » links for 2007-11-08 on 11.07.07 at 7:43 pm

[…] Warning: Software Startups are Not as Easy as Everyone Says | Software by Rob […]

#13 Sammy on 11.07.07 at 11:40 pm

Great post Rob! I can’t believe how much I agree with this. I’m one of those kids who does a lot out of school. And yeah, every good idea is gonna take a hell lotta work.

Thanks for the insight.

#14 Alex Barrera on 11.08.07 at 7:23 am

Great post Rob. You nail it. I do think though that those dreams of fame and fortune are necessary. If you have them and you are smart you’ll quickly realize how tough it is to succeed in the startup world. But, if you don’t start with that energy you’ll probably leave the company the first week. Luck has a great roll on success, but it’s also true that some of that so called “luck” can be tampered with, you just need to know how. And not many people can do that. Just take a look at Steve Jobs and the iPhone :)

#15 Rob on 11.08.07 at 8:32 am

@Alex – You’re correct; the dreams of fame and fortune are what made most of us interested in startups in the first place, and are what keep a lot of us “in the game.” But those dreams are presented as fact by so many people, especially the media, that unless you’ve actually tried to launch something (or read and believe a blog post like this one) you have no idea how hard it is.

Regarding luck: Bo Peabody, who started Tripod in the mid-90s and sold it for $58 million, when asked if he was lucky or smart, says he “was smart enough to know that he was getting lucky.”

#16 Alex Barrera on 11.08.07 at 8:49 am

hehe great quote! I agree with you about the media, they only want to praise the success stories, while most of the time, failure is much richer in terms of learning that any other experience.

Coming from a no-so-tech country is Europe as Spain, we are sometimes disassociated from the latest tech groups. Recently I attended the conference “Future Of Web Apps” in London and I realized how different the real world is. Specially when it comes to do some pitching and trying to spread your idea to investors. Even talking with fellow developers you get that most people don’t care about you. So it’s nice to have a post like yours, just to remind future entrepreneurs about what’s awaiting them :P

#17 Stephane Grenier on 11.08.07 at 12:12 pm

I completely agree. Everyone is so focused on trying to come up with that one great idea that will make them millions without ever realizing that 99% of results come from perspiration. Don’t get me wrong, having an idea is great, but the execution of the idea is 99% of the effort. I can easily come up with a dozen great business ideas today alone, but I definitely can’t execute on even one in just a day.

For example how many people thought of the idea of roller blades? How many people actually followed through? How simple is it to create a roller blade that is commercially viable? What about marketing, financing, etc. These things aren’t easy and they take time, which is where most people stop.

I wrote a similar article on my blog a while back entitled “Ideas are a Dime a Dozen” ( http://www.followsteph.com/2006/09/08/ideas-are-a-dime-a-dozen/ ) which pretty much comes back to the same point you’re pointing out today. Coming up with an idea is easy, executing on it is very hard!

Great article!

#18 Karel on 11.08.07 at 10:11 pm

@Rob, I look forward to reading that post. I do think the low barrier is large advantage, even if we all share it.

We are not competing for a fixed quantity of success. There are endless, countless creative ways of solving countless needs, each of which can be a successful business. The amount financially liquid wealth frothing the markets leaves a large pool of potential revenue. Sure, success is never easy, but the opportunity is more equal, and the variety of success will be grander.

It also makes the cost of failure smaller, and the recovery from a bad decision faster. Entrepreneurs can now fail with 3 companies/products/ideas before graduating college, being that much more ready for a real business success.

#19 Cosmican on 11.08.07 at 11:04 pm

Rob: Thats a well written truth… that most entrepreneurs know, and very few tell it out! Your philosophy is perfect for people who make webapps in their backyard with the only intention of making money. The chance of making it big is too feeble, and may not be worthy of the hardwork.

On the other hand, there are people like me who make webapps in spare time not for the money… but to express our passion & pride in owning a startup, and gain experience in the process. There is sure only a 2% chance to become a superhit, but its worth exploring.

I totally agree with your view. Single handed startup stories like PlentyofFish and HotorNot inspired me the most to develop webapps. Only after launch that I realized its not easy to become overnight millionaires.

#20 10 Reasons You Should Never Get a Job (Blog) - Personal Development for Smart People Forums on 11.09.07 at 1:31 am

[…] Warning: Software Startups are Not as Easy as Everyone Says | Software by Rob […]

#21 andhapp on 11.09.07 at 6:03 am

Very true…lot of people just ignore the years of hard work successful people have put in…but yeah timing and luck is also needed…

#22 Mooch on 11.09.07 at 8:34 am

@Comsmican, I’ll second your opinions about the driving force.

I would guess that most web application entrepreneurs, including myself, do not spend their spare time building products thinking that they’ll make millions of dollars. They spend that time hoping to make $1.00. The reinforcement you’ll get form making your first dollar drives you to try to make $10, then $100, then $1,000.

The only sure way to guarantee millions with minimal work is inheritance, which I can’t say I have in my family.

I’m driven off of single dollar bills, gaining experience, enjoying the creative time, and testing the WWW, and gladly enough, I’m enjoying the heck out of it.

#23 scotty on 11.10.07 at 7:33 pm

2% success ratio for million dollar prize still beats any lottery even if you could buy thousands of lottery tickets, and of course dreaming of success and doing something to fulfill your dream still beats working ;-) … if you can afford it

#24 Rob on 11.10.07 at 10:11 pm

@scotty – Actually, that 2% chance isn’t for a million dollar prize…it’s for a Facebook app that has a few hundred thousand users with no way to monetize them yet :-)

#25 JusW8t on 12.06.07 at 8:59 pm

A very weatlhy man once commented to me, when told how lucky he had been to have achieved all the success:

“I’ve found that the harder I work the luckier I get.”

I never forgot that statement and have found it to be right on target regarding software or any other endeavor.

#26 FollowSteph.com - Quick Links on 01.17.08 at 10:21 pm

[…] Warning: Software Startups are Not as Easy as Everyone Says These days it seems we keep seeing headlines about all kinds of people who just started a software company in their basement and have suddenly become overnight successes. The truth is not that simple. Of course that doesn’t make for an as interesting story. […]