Running a Startup: Myths and Realities
It’s hard to get straight talk on what it’s like to run an independent software shop. The media focuses on extremes: Facebook buys Instagram for $1 billion. Snapchat raises $468 million in venture capital. Everpix goes out of business despite raising $2.3 million and having $254,000 in annual revenue. And that’s just photo apps. It looks like there are two paths to walk: one of immeasurable wealth and one of bankruptcy and failure. Both paths are paved with endless 80-hour weeks, burnout, and broken families.
Part of the reason it’s hard to see a different path is that small software shops don’t talk about money very often. Money is a often taboo conversation topic in the United States (especially the Midwest), and it’s easy to sound like a jerk — either boastful or whiny. As a business, talking about revenue might make people think we’re taking advantage of our clients and living too well, or we’re not making enough money and are unsustainable. Or give competitors some kind of advantage. It’s all downside, no upside. Right?
But prospective business owners would be well-served with better information. And over the last few months, the developers of some really fantastic apps have shared their experiences… and revenue data. Some of these are quite positive and some are downright depressing. In one case, it’s simply beautiful.
We’re a different sort of business to the ones linked above: Our first product, Gimlet, is aimed at solving a specific set of problems in a limited niche. In particular, it’s designed to help libraries quantify the value of their public services (for example, reference) for their sponsors (for example, university deans and city councils). Our target market is smaller, and we’re selling something designed to provide business value rather than pleasure. Though our experiences aren’t directly comparable, I hope our perspective is useful, too. So: Here are some perceptions of running a startup, and our experiences:
Myth: You need to work a million hours right away.
Gimlet started as a side project for Eric and I. We both had (and still have!) jobs with universities that provide stable income and health insurance. Looking around, having an alternate source of income is incredibly common for independent creators. As Gimlet has grown, we’ve been able to switch from full-time to part-time day jobs. This hasn’t been trivial; it’s taken negotiation and influenced our career choices. And it’s meant spending some nights and weekends and vacation time working on software, rather than doing something more fun. And, honestly, taking a lot longer to launch than we hoped.
But, having stable income has meant we can work a sustainable number of hours on Gimlet and still spend time with our wives and kids. We built and launched Gimlet on our schedule, while we gradually learned the ropes of running a business.
Myth: You need fast, exponential growth to survive.
We’re a subscription-based service, charging based on the number of library branches using our software. Here’s our growth curve:
It’s pretty much a straight line. It has its fast and slow times, but in general, it’s been pretty steady and predictable. This growth rate is something we can sustain and plan around; it’s a lot easier to make decisions about our steady jobs when we have a fair idea what the year’s income will be.
One thing that’s helped us thrive through our slow growth has been keeping expenses low. Not collecting much money from a business is one thing; continuing to pour money in would be hard. About half of our total expenses are in server hosting, which is $160 per month. And we launched on a server that cost us $20 per month. We were breaking even within months of launch, and made back our initial investment within a year. We’ve never taken on debt or looked for venture capital.
Myth: You need to be perfect right away.
When we launched Gimlet, there was a lot of stuff we didn’t know. How much time would tech support take? How about billing? What bugs hadn’t we found? Would they be big deals? And the biggest: How much should we charge? Because we didn’t know the answers, it was pretty unlikely that we would do everything perfectly even with infinite time, which no one has.
So: We launched small, and decided to learn on the way and be flexible. As it turns out, tech support takes about as much time as we imagined. Billing support takes way more. And because of that, we realized weren’t charging enough for Gimlet. So we decided to raise our prices, leading to the jump in our annual subscription rate:
Was raising our prices a hard decision? You bet. Does the added time give us more flexibility to to work on Gimlet while keeping on top of billing? Absolutely. Do we have a ton ideas about how to make Gimlet better? Of course. Do we have a better idea of where to direct our work now that we’ve been in business for a while? Totally.
We couldn’t be happier about how building and running Gimlet has turned out so far. We aren’t going revenue gangbusters, but we’re steadily climbing towards decent full-time developer salaries while building a product we love for clients we love. Even more importantly, we’re helping keep our families fed and healthy and loved while we do it.
If you’re an aspiring developer, I can’t guarantee this path will work for you. It’s worked great for us, though.
If this isn’t success, I don’t know what is.