> While we gained some traction with some startups, we ultimately weren't able to build a hyper-growth business. [âŚ] We then decided to pivot into a vertical B2B SaaS AI product [âŚ, but] we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business.
American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2â3 years after pivoting three times.
On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
If you told most European startup founders that in 5 years you'll have plateaued at 15-20 employees, a steady income flow, and you'll be paying yourself $200-250k a year, they'd think of that has a big success. In the US they may very well think of that as failure, especially if they are VC funded. I remember hearing a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset and he doesn't want to do business with you.
If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.
Worth pointing out that something being bad for the economy, from this perspective, isnât necessarily the same as being bad for the population. Median incomes are stagnant and quality of life is declining in the US. In part, Iâd argue this is because hyper scaling and overoptimising are squeezing the humanity out of most economic life, and most people are not benefitting from these trends.
There are exception: we need big companies to make GPUs, probably. But itâs not clear to me that this logic applies universally. Some inefficiency is probably going to be good for public wellbeing.
But they're not? Adjusted for inflation, median US household income is 18% higher than fifteen years ago and 32% higher than it was thirty years ago: https://fred.stlouisfed.org/series/MEHOINUSA672N
You could say it was stagnant from 1999 to 2015, though.
However, because big-ticket items we all buy (housing, healthcare) and items many of us buy (education, childcare) have increased much more rapidly than inflation, the overall impact has been a deterioration of financial stability for many Americans.
But note that some of the change here is people building and buying larger houses as we get richer, which inflation calculations account for and this division does not.
Average rent per square foot since 2014 has increased by 42% [1]. By your unadjusted income chart, incomes have only increased by 33% in that time. In my case, existing just to the left of the income median, that's meant going from comfortably affording a 2br apartment and weekly dinner out, to barely squeaking by in a small 1br. Add in a $600 car payment (which I have managed to avoid), and it's not possible to live reasonably.
If weâre comparing ourselves to Europe we are certainly not worse off (or anyhow the portion of the population that is worse off is not evaluating whether they should work at FAANG or a startup). Any serious discussion has to start from acknowledging that we are richer.
But we do want them considering our hesitation at paying for things without ads, especially when a free gmail, google maps, google drive, etc is available.
The person who you should expect (or look for) to buy your startup for $50M will reasonably expect to meet someone else in the future who will then buy the "startup" (probably at that time an established company) for $100M or maybe $200M - otherwise why would he want to buy your startup? People rarely buy startups just to extend their collection of statups ...
If you build a staryup with the mindset of selling it to someone bigger - you will never grow to be the next BIG among the Big Guys. And if you are not looking to be one of the Big Guys (which implies you do not plan to sell your startup) - you can live happily on the plateau with 20 employees and a satisfying income.
> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.
Correction: it's not bad for the economy, it's bad for the investors (the only people who matter in the whole world).
I'm sure a tremendous amount of actual value in the economy has been destroyed by VCs demanding a binary result of either total failure or exponential growth.
I've learned to mentally replace "the economy" with "rich people's yacht money" whenever I read it in an online article. Make that substitution in this article, and it makes a lot more sense.
> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize.
You don't win the big price either by taking the big swings. I mean, some people do, but they are so few that they can be considered a rounding error.
Maybe the economy wins when one-in-a-million business unicorn appears, but I don't make any of my other life choices by considering the global economy either, so why would consider it here?
> On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
I don't agree. I think this is specious reasoning fueled by a mix of cargo cult mentality and survivorship bias. Just because a hand full of startups made it all the way through to a unicorn status, and some where bought out for undisclosed reasons,that means nothing on whether an idea is or can be hiper-scalable. To make matters worse, this reeks of short-term mentality that serves no purpose whatsoever other than find yet another angle to put together a kind of pump and dump scam.
I don't think any of this is the case, and you haven't really said why. Focusing on winning big is absolutely not survivorship bias. Everyone in the 100m is aiming to be the fastest human on earth, but only one will win. That's not survivorship bias. Throwing fallacy names as insults is still just insults.
> Everyone in the 100m is aiming to be the fastest human on earth, but only one will win.
This is a mental model of how things actually work that is fundamentally wrong and out of touch with reality. In any free market economy you have multiple competing businesses operating in the same market. The world is not a 100m race. Second place can still turn an fantastic profit and make everyone rich.
Value creation isn't a zero sum game. Increased productivity benefits everyone. Whether it hyperscales or not, genuinelyprofitable businesses add value to the economy. This in turn creates more opportunities for everyone willing to participate.
> Value creation isn't a zero sum game. Increased productivity benefits everyone. Whether it hyperscales or not, genuinely profitable businesses add value to the economy. This in turn creates more opportunities for everyone willing to participate.
Your comment contradicts the "hyperscale or bust" mentality. Hyperscale is not a necessary condition to be competitive. You can put out a better product/service even before economies of scale are reachable. In the meantime, this hyperscale nonsense is nothing more than cargo cult mentality where the need for a sustainable business model is replaced with hand-waving and mindlessly repeating "hyperscale" as a mantra, which has been the death of countless startups.
"Value creation" is not the same as the monopolistic paradigm of a winner-take-all 100m race. Hyperscaling is a system where potentially profitable businesses are destroyed because they weren't profitable ENOUGH for some singular VC investor class.
I agree with you that profitable businesses add value to everyone's lives, but there's a maximalist limit to the relationship where they start extracting value and opportunity overall.
Similarly, almost all of the track and field athletes always cross the finish line, regardless of placement. If your business is genuinely profitable, you should do the same. You don't have to be gold medalist if it means compromising your vision or values. If you object to the whims of investors, it may be better to focus on things you can build without their assistance. It isn't as glamorous and it may not make you a billionaire, but it does hone your ability.
Frankly, not all of the VC sphere is focused on value creation. Much of it seems focused on buzzwords and vaporware. Success in the VC world might mean keeping the hype and promises of hyperscale performance rolling long enough to successfully dump on retail. Sure, VCs and founders profit, but is it genuine value creation?
It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinelyprofitable value creation.
That doesn't seem in any way relevant to the point about survivorship bias. Nor to the US, whose system has if anything produced far too much food for its citizens.
> I would argue it is less healthy for the economy. Large companies are very good at extracting value, not necessarily producing it.
I agree, but from a different point of view. Companies put out products and services aligned with their strategies. In large companies, you build up strategies that spread across multiple domains. This means that product managers need to enforce constraints that will go well beyond the concerns of the use base of their specific product. That is a net loss for the customer as the product/service they once loved is now a way to force-feed them things they do not want or care about.
I am sure you yourself can think of some specific examples, where companies earn money without providing value.
Or are you suggesting, that every single cent that every single company earns, comes from something that actually provides value to someone (excluding shareholders)?
[2] Steve Jobs quote: "It turns out the same thing can happen in technology companies that get monopolies, like IBM or Xerox. If you were a product person at IBM or Xerox, so you make a better copier or computer. So what? When you have monopoly market share, the company's not any more successful.
So the people that can make the company more successful are sales and marketing people, and they end up running the companies. And the product people get driven out of the decision making forums, and the companies forget what it means to make great products. [...]"
> Large companies are very good at extracting value, not necessarily producing it
Citation seriously needed. There is no argument here, merely a demonstrably false statement. A large company is literally the only kind of entity that is capable of creating entire categories of value which make up a huge percentage of the global economy. Furthermore, a lot of what many, many small businesses are doing, especially very profitable ones, is directly enabled by and entirely dependent on the existence of large businesses.
Everything apart from the look of the iPhone is value created by publicly funded organisations, with the exception of the transistor which was developed by at&t. And at&t were effectively a government sponsored monopoly at the time. So apple extracted value, I would argue.
I can't think of any companies that were more product-focused than Steve Jobs' Apple. They created so much value across so many industries. They created so many transformational products.
Their machines in the 1980s revolutionized personal computing (eg they brought GUIs and the mouse to the world).
The iPod let us carry thousands of songs, audiobooks, or podcasts in our pocket.
iTunes changed the music industry, giving us an easy way to get the music we wanted without piracy.
The iPhone put the Internet in every pocket.
Honorable tangential mention: Pixar transformed kids movies and dethroned Disney.
Apple made a ton of money making products that were delightful to use that users happily pay a massive premium for. They made things that were so much more than the sum of their parts.
Publically funded means "paid for out of taxes skimmed off value created by private citizens and private corporations". The value was extracted from people by taxes. It was reused into something useful for people by Apple.
> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize.
If you do, you still won't win the big prize. The people who do win the big prize are so few, even in the US, that it's an almost certainty you won't do it. Perhaps you're right that there must be thousands of losers for even a single winner to come up, but that seems so inefficient I doubt that's really true.
Iâm not going to look for stats but as someone whoâs been in the startup scene for a long time, itâs true and the stats are probably even worse than that. Itâs totally inefficient for the entrepreneur but very efficient for the VC. One of my other observations is that the ones who do make it often come from families that have already made it and are able to leverage those connections and experiences.
This has not been my experience at all. I moved to the bay area in 2012 and 5 people I met living there have built unicorns/have net worth now around > $1BN. None of them leveraged family connections. this might be true in Europe but the best folks figure out how to move to america.
I'm actually 'stuck' in this situation right now. Make about 350-400k/year with no prospect to clear (much) more or exit. I mean, why should I exit ? To risk doing something else and 0.1% chance of making millions, or go along this way a few more years while building my investment portfolio.
> In the US they may very well think of that as failure, especially if they are VC funded
Man, if anything, this is the part thatâs weird.
Thereâs this very weird undercurrent of keeping track of who is âwinningâ in the US.
Is it not possible that someone who shepherds a hypergrowth startup to IPO, is just as of much a winner as the bootstrapped founder who has a profitable, sustainable business with a handful of employees?
I get it - everyone wants to win. But in hyper focusing on winning, you may lose sight of the fact that thereâs lots of ways to win.
The last part of this comment is the last part of Jerry Maguire, because I think Jerryâs mentor Dicky Fox has the right idea about this:
âHey, I don't have all the answers. In life, to be honest, I failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.â
People chasing such carrots on sticks are not healthy, happy nor balanced individuals. Every single one of them has something fundamentally broken deep inside, unquenchable thirst to over-compensate for that itch, which can manifest ie as greed.
In most cases in fact its just broken childhood mostly via broken father figure, source of eternal income for most psychologists since those issues are not actually fully fixable, at best they can be tamed a bit and folks brought into acceptance. Add some lower intensity mental issues and voila.
Of course neither money nor power work for such issue, but if one surrounds themselves with enough people repeating such mantras, it may eventually feel like they are right. At least for some time.
Nothing for regular folks here, unless one specifically says and feels that pursuit of happiness is not really on their agenda.
Also, would be nice if somebody compared mental issues drug consumptions US vs Europe say split by jobs. I literally know 0 people, peers, IT colleagues nor friends who take anything on mental health, we are just bunch of relatively happy balanced folks here who are not in frequent dread over some bigger protracted health issue that can wipe one out, don't have to worry about saving up a million or two for out kids universities, have enough time to relax on vacations, fully paid sick days etc. Once one is not desperately poor, this is how proper quality of life looks like, not some numbers on accounts.
I think you have a kernel of insight in this take, but I have to be frank: I really donât think you frame this or phrase it in a very kind or generous way.
I say this as someone who has personally experienced the kind of struggles you talk about in such unflattering terms. (I lost my dad to heart failure at age 7, and have struggled with major depression for most of my adult life.)
Doesn't this thinking also lead to the eventual enshittification of their product? Hyperscalar growth will eventually stop. At that point to justify your valuation you need to start screwing over customers
It also means that, as a customer, you are utterly fucked because almost everyone you want to do business with or buy things from could potentially disappear in a few years because bootstrapping isn't exciting enough for the VC fucks. "Enshittification" runs rampant because literally EVERYONE is swinging for the fences, even when they shouldnt be.
This is whatâs wrong with this country. We are run by a ruling class that only sees a profit. Screw sustainability, I (âSV VCâ) just want 100X off my $1M initial investment, bro. Either hYpErScAlE or fuck off.
Sometimes the priority appears to be hitting all of the latest buzzwords. Customers and long term revenue may not be as important as dumping on retail with an IPO or tokens. The promise of "hyperscale" performance becomes more valuable than tangibles. Which is the same as saying, demonstrating tangible performance is undesirable, if it detracts from the narrative of "hyperscale".
Swinging big or not, the odds of (by definition of startup) "failure" are high. Therefore, you might as well swing big. A swing small experiment that doesn't connect is still a "failure".
Put another way, there is an endless supply of noise (read: competition for attention). If you're not swinging big enough to cut through that clutter odds are good you're just adding to the clutter. That's going to be an endless struggle.
> On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
was it? Or the inability of other countries to block US startups (because the US government will never let them) makes it impossible for local startups to compete leading to monopolies? If every country went US way of blocking TikTok, the hyper-scale growth would cease to exist fast.
Money from customers of all non-US countries is the biggest reason. Where US tech companies can't grow, local alternatives grow to the same level (China, Russia).
> And while this might be healthier for you as an individual, it's bad for the Economy.
... an while it's bad for the economy, it may be good for the country. Notice how Europe doesn't have regular school shootings, rampant crime or 100k people a year killing themselves with Fentanyl. It may have something to do with culture that prioritizes other things besides the economy.
My impression is that many profitable small businesses (small teams, long-term goals, which can be considered even boring) don't make it to the front page of HN because they don't aim (unrealistically) high. I find it fascinating how this culture embraces a "move fast, break things" mentality, which seems to apply (only) to the tech industry, where someone with multiple failed businesses is often labeled a "serial entrepreneur" (selling unsustainable company I don't consider a success). It's amusing to think about what it would be like if someone failed in multiple sports and referred to themselves as a "serial sportsman."
The problem is that once you take the VC coin, you are pushed towards hyper-scale. If you don't take the VC coin it's a much harder and longer path to self-sustainability, unless you have some way to fund yourself e.g. consulting. 37 Signals is the model here, but they are super-exceptional (they created Rails, after all).
Then having got there, a VC-funded competitor will just roll over you as they'll have better connections and funding.
I am in Europe and I work for a company that has exactly the same struggles.
Sales cycles for B2B for big players are insane - price points to offer our stuff to small/medium businesses are not enough.
Even if we provide value and save time for customers it still is hard work all the times to explain the value.
Well the grass is greener on the other side - but I can see how having B2B business where for years you have the same struggles just to keep the lights on and every month is the same and you have the same conversations but with different customers explaining 10x a year exactly the same thing - why you provide the value ââ is just something people donât want to get stuck into and can lead to burnout rather quickly.
So I can see how someone would like to land business idea where the value is obvious and people scream âtake my moneyâ.
There's a couple of factors that play into why companies in the west tend to scale vertically rather than horizontally.
The first is looking for a return on investment. If you're going to attract other peoples' money, those "other people" are obviously looking for companies that are going to provide a return. And since a wise investor diversifies their portfolios, they know that a lot of their investments are going to fail, so one way to hedge that is by encouraging all of their investments to grow as much as possible. That way a small number of hyper-performers will make up for the losses.
But we also see vertical growth happen with major corporations as well. Not just startups. And I suspect this has a lot of to do with red tape, over-regulation and bureaucracy. When you need to jump through tons of hoops including getting licensing and permits, setting up tax and payroll accounts... not to mention if you want your company to be publicly traded and the hoops you need to jump through for that ... it can be way cheaper and lower-risk to expand the activities of an existing, already established company than to spin off a new one.
Small projects asking interesting questions will be laughed out of the room, labelled as lack of "ambition". The fact that not all interesting questions require 4-5 years and millions of dollars to be answered seems to not bother people paying the bills.
> and not shut down after 2â3 years after pivoting three times.
An important part of running a business is taking a risk.
Furthermore, plenty of businesses fail for reasons that have little to do with the economic value / needed functionality of the product. In some cases, it takes a similar company with subtle differences (or even timing) to really understand why one business failed and a different succeeded.
(One very bad example could be the difference between Sega and Nintendo in the 1980s and 1990s. Compare the NES to the Master System, the SNES to the genisis, and the Game Boy to the Game Gear.)
(Another example can come from comparing Tesla to the dozens of other electric car startups.)
But it works for the USA. Most, if not all the start ups that matter, originate in the US and a lot of them are the unicorns we all use daily like TSLA, GOOG, NFLX, MSFT, META, etc.
And the founders are natives and immigrants, so it is not a demographics issue. It is more of a process issue for the rest of the world.
> Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2â3 years after pivoting three times.
How do you get the moon, if you don't aim for the moon? Risk == Reward. When you don't risk, you end up with startups like in DE e.g. Auctionata, Moped, etc.
> American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2â3 years after pivoting three times.
This is just the culture in unreasonable VC scenarios. Most new companies are not VC backed and have realistic expectations on the new business.
American VC-backed startup culture, you mean. And yeah, that makes sense. If you put money into something you expect to get paid back in 5 years. You need growth to do that.
If you want to go slow, then you bootstrap your startup.
> While we gained some traction with some startups, we ultimately weren't able to build a hyper-growth business.
>"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business."
How many wonderful niche products would be around if their owners had tried for a small business instead of a 'huge business' with 'hyper growth'?
People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
You need to sell a lot of 10$/month licenses for it to even viable to a 2-3 people startup in a developed country. There is also the cost of opportunity to consider in that.
I don't understand why people even think about selling $10/mo licenses.
Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
Customer problem discovery is easier, you get reputation network effects within the vertical, you gain trust because you learn the industry lingo, you can actually solve peoples' problems because you're not balancing needs against unrelated industries, they're willing to pay, and once you get 20 customers you're doing pretty OK.
> Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
Iâve successfully done exactly this.
Except in order to get there, we had to spend 3-4 years selling cheap $29/mo self-serve plans at volume to iron out all of the kinks in the product and UX. Only after that were we able to go upmarket selling $40-90k/yr contracts.
It all boils down to the fact that customers paying $20k/yr or more have extremely high expectations across the board. Itâs extremely difficult to just pop into a completely new market with a brand new product untested by anyone, and expect large companies to trust and buy from you.
True and what I find funny is that the same companies are often willing to pay a lot of money to consultants that will deliver a shitty streamlit POC. Like they will literally pay consultants the equivalent of 4 years of new SaaS cost to get a POC instead of using a product with rough edges and grow with it. Expectations can be really dumb and confusing.
I'd pay to buy a bad house and then spend money to improve it, rather than paying a full rent for the same bad house and hoping that the landlord uses that money to improve it.
I don't get the comparison. are you comparing a SaaS that is doing 70% of the job and a shitty streamlit POC that no more than 3 people can use in parallel ??
We experienced something similar - we were able to wrangle a $30k/year contract as one of our first contracts, but the expectations around the software were and continue to be incredibly high - we sort of wish he had had a few $100/mo customers first to iron out the UX, and just learn more about how to work with a midmarket/enterprise buyer.
Anyway we survived but we understand why companies move upmarket over time now haha.
Yeah exactly. You can't just roll out of bed one morning and grustle out a stable enterprise application. Also:
> customers paying $20k/yr or more have extremely high expectations across the board.
They definitely do, in certain ways. But also a lot of the software companies use sucks shit. But this part of the other comment cracked me up.
> a medium sized traditional industry that has ancient, crummy software
This is actually how to do it but the thing they're leaving out is that you have to already have knowledge of the specific industry and its players, their niches, and the software they use within them. You have to know where standards are high, and where the current options are bad, and how to market that improvement to the companies that are juuuust flexible enough to switch to your product while being conservative enough not to dump you if exactly one VP leaves.
Once you have all that in place, sure, you can "just" sell your software to them lol.
>This is actually how to do it but the thing they're leaving out is that you have to already have knowledge of the specific industry and its players, their niches, and the software they use within them.
In most cases, this requires at least one former employee who used the crummy software. Most likely this person would be the one to identify the problem and propose an alternative solution.
Information like this is extremely valuable. It forms the core of the biz opportunity. Casual comments often overlook this.
Builders doing their own thing may not overlap with employees using office horror software 9-5.
Boiled down into 1 sentence: Create a company that solves a problem youâve personally experienced.
(If you feel like you havenât experienced any problems worth creating a company to fix, consider putting yourself in situations where youâll be exposed to different/new problem sets)
Yes, get industry experience! You have to be pretty special to be just a software developer with no domain knowledge who can somehow make something more valuable than the bazillion other just-a-software-developers out there. I sell fairly high priced software to companies and I'm doing fine. Though I'm kind of lucky in how I got into it and by now most of my domain knowledge has come from my previous customers asking for things.
>Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
The guy is so out of touch it's like a cartoon. Like, right, why did they think of that?! Just create something that's worth several thousands a month instead of a small value product!!! And get all the big companies who can actually afford that kind of thing to buy your product!!! How hard can that be?
I didn't say it's easy, and it's probably not the right fit for you. But it's at least a plan with a good end-game, which a lot of $10/mo online only business models simply cannot turn into something viable.
50-1,000 person companies aren't actually that big. You can get to know the decision makers and it's not like navigating 20,000 person corporate mazes (also possible if you have the stomach for it).
It does seriously benefit from industry knowledge though. The reason so many people think it's a ridiculous pipedream is because they have no industry experience outside of tech, and that's a big problem -- a solvable one, but most people will never do what it takes to solve it and instead say that it's not possible.
It takes a lot of willingness to do non-tech things though. You can't just set up an online marketing funnel and watch the cash come in. It's relationship driven. The advantage of going after a vertical is that the relationships start feeding each other -- you get social proof within the niche industry. And you don't compete with VC-backed software companies as much because they much prefer horizontal solutions (which can get bigger and achieve bigger exits) versus vertical solutions.
The only times I've seen anything remotely like that work, it's a situation like this: Two engineers work together at company A, become friends and gain experience in the domain. Both move on, progress in their careers and work other companies in the same domain. They meet for coffee and person 1 says: "hey remember that problem we had at A? I see it again at B", person 2: "me too and I've been working on a side project to fix it, you should totally buy the solution from me". And voilĂ . Could a kid right out of school build the same thing? Sure. Would it have ever succeeded? No. They lack the domain experience and the social connections to do it.
Hell, I went straight for 20k/mo (average) with my SaaS.
The key is providing a good value proposition. My software would save my customers more than they would spend on it yearly, while outsourcing $50-300k/year in salary worth of work that previously had to be done in internally (usually incorrectly).
You always need to solve an actual business problem that people are willing to pay to fix.
Would you be willing to share insights and help with mentoring in private. I'm going this path (building SaaS) and would appreciate someone with experience to share to discuss topic.
There's gotta be a name for this fallacy. "This enterprise software sucks and is extremely expensive, so we will build something that is actually good and become billionaires!"
This is the graveyard of engineer driven startups in the enterprise space, who make the mistake of thinking that software quality matters. The fact is it is not a top priority, if it is even a priority at all.
In the enterprise space, if you're not a Fortune 500 company, all that matters is 'relationships', by which I mean sleazy sales processes (or actual nepotistic friends-and-family relationships).
Joel Spolsky wrote a great essay once about why there is no software priced between $1000 and $100,000. Because above $1000 you need a sales team that takes purchasing managers to strip clubs and play golf with CEOs, and that shit adds up. On the plus side, your software can be dogshit, like the stuff you work with every day.
Only engineer and product oriented types think that quality has any actual value. Unfortunately it does not, even less so if your only USP is "quality". If your products only differentiator is that it's technically better than the competitor it really needs to be 100x better in order to sway anyone's interest.
If your maximum work/effort you can put into any project is 100% which you have to allocate into fragments, the product person will put 80% into product development and 20% to marketing but a sales person will put 80% into marketing and 20% into development and unfortunately the latter will product much better results. All it needs to be is "good enough" but reaching to your target market with the right product really is the key.
The unfortunate side effect is that quality is best achieved by having the PR team write it out and put it into a snappy slogan on your product website. Done. Quality achieved.
Edit: And the above applies to your typical non-safety critical Saas, Enterprise, B2B, B2C software. And thinking back to for example the Boeing crashes it likely also applies to the the "safety critical" software/systems as well...
The world has changed. Today you can sell software for $5000 or $10000 without any sales process. Not always of course, you have to find the right niche.
Yes. But it's not for everyone, especially not for a lot of engineers.
Many of these buyers feel more comfortable meeting you in-person, so going to trade shows, writing articles for niche trade publications, and sometimes doing site visits are all very helpful. So is cold calling.
Sales cycles are often slow. You have to get used to customers taking months to decide, having lots of meetings with different stakeholders, and to get good at telling the difference between those who need a lot of meetings but will likely close versus those who will never do anything. It's a very different game than selling subs online, which I know little about.
The product does need to be decent but I disagree with others that it has to be amazing. Most enterprise software is horrible. They will be delighted if you actually solve their problems (rather than the problems horizontally-oriented software vendors want their customers to have), even if it has some rough edges, as long as you're very customer-focused, responsive, and available.
But it also tends to be durable revenue, because you get tightly integrated into their operations if you do it right.
The one point where gp is wrong is you really can't sell $4k things; $10k min and $25k is better. eg a good to great salesperson closes 25% of deals, so you have the cost of 4 mqls per one close, and then the salesperson gets 20%ish of the deal.
Just gotta find that price point within discretionary spending where a manager can OK the cost without having to get a VP to sign off on it. It's definitely way higher than $10/mo.
Pricing really is key here. $10/month is very hard for most businesses. Depending on your situation, you need to find the "sweet spot" that matches your markets budget, while also making the math work in terms of your revenue needs.
For example, you could try to find 100 customers paying you $500 per month, and do OK with a small team. The alternative, of $10 a month, means you would need 5,000 customers, which could be impossible, depending on the circumstances.
Small businesses focused on bootstrapping should also be aiming for revenue within months, and not 3-5 years. But that's another topic entirely
>> How many wonderful niche products would be around if their owners had tried for a small business instead of a 'huge business' with 'hyper growth'?
> People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
Isn't that a better outcome than putting in exactly the same effort but winding up with a totally failed business (i.e. nothing).
> it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
I agree and I disagree.
It is hard to bootstrap a product. It's even harder to bootstrap a product that folks want to buy. It's even harder to do that when the prevailing wisdom on this (and other tech sites) is to go the VC-funded route.
The VC funded route -- for the vast, vast, vast majority of software businesses ends up being the exact same as the bootstrapped route -- except that you lose one avenue when you find out your business isn't "hyper-growth" or isn't going to be a huge as you claimed in your pitchdeck to the VCs. You lose the ability to pare back and to be what is described as a "lifestyle business". On failure, the business gets sold or stripped for parts, unless the founder can somehow get the VCs to agree to let them 'buy it back' or write-off their investment and give it back.
Bootstrapping means taking that risk on yourself; but it also means control over your options, and that is one fundamental strength to bootstrapping you don't get with VC funded startups.
Absolutely, it's no salary or the aptly named ramen profitability for a long time if your marketing is not aligned with the folks that will buy your software, or if your software really is just selling a solution to a problem no one actually cares about.
The 'hard part' isn't the engineering. It isn't the technology. The hard part is the marketing -- the connecting the hopefully expensive problem you solve to the right folks who want to buy that solution.
To your second part, I wholly agree that selling $10/month licenses is not a viable way forward if you want to be anything more than a solopreneuer.
But to do that, you need to hone your positioning so that you get in front of the folks with money who need to solve the problem your solution solves.
In your case, it looks like you run a web-auditing tool (according to your bio) called caido.io; and it looks like you're targetting basically everyone who needs to audit a website.
In the thought that "there are more fish in the ocean so why not fish there", that is a seemingly sound idea.
But you don't really want to spend your time trying to fish in the ocean if you have a barrel you could fish in and get the same result... dinner. (I did not come up with this metaphor, that was Jonathan Stark -- who writes a lot about positioning in this context).
The question you have to ask yourself is, are you positioning your product so that the CISOs or the large cyber-security firms would want to buy it? And if you did, do you think they'd trust your product at a mere $25 per month?
Anyway, the point to all this is that the problem is learning how to position the thing you build and get it in front of the right folks, and that's a marketing problem, not a technology problem, and that's something that we as engineers have ignored for far too long collectively.
I wish you the best of luck with your product -- we need more small software businesses in this world!
If you need funding to cover your monthly nut, you need a plausible path to hyper-growth; the portfolio math doesn't work for investors otherwise. If you set out to build a small-scale sustainable business, and you succeed, you can avoid funding. But if you're pivoting to something entirely new mid-to-late-ways through your company, you've probably burned down most of your reserves.
Yes. Most of what early vc practically pays for is salaries (and a lot of that is really just a passthrough to landlords because California is an incompetent state run by incompetent people.)
I suspect the majority of entrepreneurs aren't doing it for the money, they are doing it because they don't fit the traditional corporate mould. The people the media loves to focus on are the outliers.
Also, for some of us, building your own company is much less risky than working for a company.
No matter how comfortable or secure you feel in your job, sudden layoffs can and do happen. Also, what if you develop an illness that makes you unable to work?
Having your company means you can make money while you sleep, you answer to the market (which on average is somewhat "rational") rather than to a (possibly capricious) boss, you get to grapple with a wide range of interesting challenges that take you out of your comfort zone and lead to personal growth, and so on.
As long as you are able to build a company that provides income at least comparable to what you would make at a job, I think the benefits are numerous. It is not for everyone though.
Maybe my understanding of "big company" salaries are skewed but I imagine there's a profitable middle ground between big company salary and hypergrowth? As long as one isn't taking VC money at least
On the flip side, I can't say I'm super sure what "hypergrowth" means, it's a rate of growth but I guess what really Matters is some expected valuation/market cap kinda thing
Isn't 500k+ TC on the upper upper end of the salary distribution though? Vs equity in a rapid growth 20% CAGR or somethin? Or hypergrowth that caps out around 2M ARR?
I guess I'm just trying to gain some career perspective on this heavily bootstrapped startup I'm at thats targeting the alt-thread-mentioned "medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people." and whether it's really worth it for me
I wonder how the probability of securing such a job - with huge layoffs lately and increased competition - compares to the probability of business success. There's unemployed engineers grinding at system design and algorithms 10 hours a day for at least half a year to get an interview. If I'm going to spend hundreds of person hours on something, I think I'd rather start a company to be honest. Additionally, internationally those levels of pay are incredibly rare.
Yeah I have been wondering this myself as well. I'm one of 3 co-founders in a bootstrapped company doing consultancy for a few years in a LCOL area. We have been paying founders 50k/year salaries for the life of the company. We haven't been especially lucky and we haven't been super brilliant in our business decisions. Yet we are doing fairly well.
This year we made 400k revenue, 150k profit and 40% growth. Our sales prospect are a lot better than at the start of the year. So I'm expecting to have another strong year of growth next year. Also we are nowhere near saturating the market and can have strong growth for many years to come.
Salary + 1/3 of profits is equal to 100k for this year. 40% growth doubles the company every 2 years, If everything goes well just salary + profits will grow very nicely. Then on top of this come the exit opportunities where founders will make millions.
Product and service businesses are very very very different things. Service you get immediate cashflow but the thing doesn't scale past the humans. Software scales infinitely in theory, but it takes a lot of time to build before you even get 1$ out of it.
You can hire people into consultancy business and grow it like any other business. Sure it won't become the next magnificent seven, but you can grow it enough that you can make a lot of money.
For example, there exist plenty of consultancy companies that have 10million revenue. That would be 20x growth for us. In practice that would mean 500k - 1m yearly income for founders in our case. On top of that the company probably could be sold for 30m - 100m.
With typical vc dilution founders need to grow a very successful product company to earn similar amounts of money. There are plenty of examples of unicorn exits where the founder team has made less.
I've know quite a few businesses that started with services then transitioned into product. Once you have enough domain knowledge it is the obvious next step.
'Just' making money is not very hard in IT. We have been for decades and it's only growing; we do emergency software fixes which means we can ask whatever. We do not, we have a high hourly rate but it is usually clear what it will cost. We don't grow because I do not want a big company and good people are almost impossible to find, but there are way too many projects as, and I know HN doesn't believe this in a survivor bias kind of way, software is getting worse very fast (thanks node and python; and we used to laugh at php; that's more or less a joy these days) so our regular clients are calling more often year after year and new clients come in at a rate I don't care for. But the dream still is products, not consulting; I sold my first product company 25 years ago; I shouldn't have. Nice money but I want it back; consulting is nice and we make a lot for the past 25 years, but making products is nicer so we are now doing 50/50 products vs consulting and hoping it will work. We don't have to work for decades already but why not if it's fun?
> Nothing wrong with setting out to build a Google
Sure there is. The probability of success is as good as zero. In all seriousness, a better business model is buying $1000 a month in lottery tickets. You have the same chance of success, you can do it on the side while working your job, and if you do hit the jackpot you don't have to do any additional work. This particular business has no path to being a Google but it might have a shot at being a Basecamp.
All of these have 10 different paths (in reality), any of which if you take the wrong one could end up in some kind of expensive dead end or spectacular failure.
You are zooming out, and when you look at an abstraction from a distance it's easy to miss the details and just boil it down to probablities.
The reality is that you measure and get information on all of these things to determine more accurately what odds you have. The act of measurement changes the probabilities, because if you do it right you will know more than you did before.
And sometimes you start in a place (or take directions into a place) which put you at such a disadvantage with competitors that you canât âwinâ. Itâs rare you can know that while itâs happening though.
In theory all these things are controllable and no problem is unsolvable. Sometimes itâs even true (post-facto however, more often than not). That view is often the best for succeeding (or more precisely, NOT having that view often puts one at a disadvantage when it comes to succeeding).
But the probabilities are often the more accurate model. That is often the best model for deciding if you want to take a bet, or for comforting yourself later if it doesnât actually work out perfectly. It really doesnât help though (most of the time) with actually doing successfully.
As a customer of Konfig, I am super bummed about this. I think we may even have been their first customer (referenced in the init commit). Dylan and Anh-Tuan solved a number of real problems for us, and they did it spectacularly. They essentially provided a one-stop-shop for generated SDKs and beautiful hosted docs/tutorials that would call our API and immediately allow users to start playing with real data. Prior to Konfig, we were hand-writing a hodgepodge of SDKs to wrap our API and using ReadMe to host the docs (which never quite worked interactively with our API due to request signing that we require on our API).
Tons of respect for these guys and I wish they'd found a way to make it work.
Also, for anyone finding themselves in a similar situation as Konfig (a product that (some? most? all?) customers love, but revenue not scaling as needed), please consider charging more. We probably would have paid 2-3x what Konfig was charging us and more as we grow, but they never asked and never built in any usage-based cost scaling (like $X/month/SDK, $Y/month/demo, etc).
I got to know about konfig from your product itself. The docs were(maybe still are?) so good that I had to check what was behind it. It really is better than swagger/redoc.
There are multiple open-source tools backed by large companies to do this. I use one of them for my sdks. So I can really understand how they could struggle to sell it, it's a hard sale to sell someone a commercial product that does pretty much the same as free open-source projects. I was tempted to check it out but as bad as it sounds even with it being open source and free I couldn't find a reason to spend the time over just using what I have now.
The product in TFA is a wrapper around the tool I linked, plus some stuff for docs and so on.
Wrapping free software is mainly viable towards enterprise customers, where the thing you're actually selling is SLA and a certain level of insurance and sexiness on middle manager CV:s and so on.
Oh, it looks like we were competitors! I'm the founder of ReadMe.com, and we do API docs (as well as SDKs and more).
I don't really know why, specifically, we ended up being successful. I know I also had a lot of false starts â slightly iterating on the core idea until I hit something people were visibly excited about. I also knew it was a hard market, so I put a lot of my time and effort into non-engineering things. Hacker News was always good to us, especially as I was more vulnerable.
I'd love to hear more! I'm going to reach out privately :)
Overall, though, congrats on all the work you put in. It's incredibly hard to start a company and believe in yourself, and you should be proud!
You might have been successful, compared to konfig, because it looks like you had an 8-year headstart. It could be that konfig was a fine idea and well executed, just not at the right time.
Maybe, but thereâs a number of companies in the SDK space that popped up the past 3 years and are seemingly successful. And there were a number of companies back when we started that are no longer around.
>"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business."
I think we are unfortunately going to see this outcome appear a lot in the near future as the AI bubble pops
Am I the only one who would respect the effort more if it had instead been written like so?
>We then decided to try using generative AI in a vertical B2B SaaS product, believing we could solve previously unsolved problems this way. We came up with and pitched multiple ideas, but user feedback was never positive enough to give us confidence that we were on the right track to build a huge business.
As is, my first impression is something like: "Jeez, whoever wrote this is firmly embedded in a niche fly-by-night culture that instinctively turns me off, and now can't psychologically shake free even immediately after crashing and burning".
This is not the first story I've heard of a product that isn't quite right, but when deciding where to pivot, fell into AI as the answer and then failed. I've said it before, but it bears repeating - when we figure out what AI is good at and what it is not, we will start treating it as a tool instead of a goal, and our product ideation will stabilize.
What we donât understand yet is what that means. We have never had such a thing before and itâs not clear what the patterns are that will make the best use of its known attributes with the least exposure to downsides â whether those be related to the tools, the end users, or the business stakeholders, or any other parties. Volumes more nuance to understand, and weâre just getting started.
The product itself is fine. I was part of a startup that was happy to pay for said thing and got a lot of value from it (sdk from OpenAPI spec). So I donât think product market fit was the problem here.
The problem is, people do want the product that the author was originally selling. A high quality SDK from OpenAPI spec is specifically a product that well funded YC startup I used to work for paid for. So I would contest the characterization that it was a bad idea.
My opinion: In software, the best use of AI is to create a do-what-I-mean UI. That is so-called AI (more to the point, use of LLMs and vision, speech, and audio processing) can allow new modes of interface that help a user operate the computer and achieve something that was nearly impossible with the user at the raw controls.
This will not produce superior work to someone who knows what they're doing at the controls. A competent programmer doesn't need this. An excellent touch typist doesn't need this. But let's say someone who has a vague idea of what outcome they want, but an incomplete understanding of the mechanisms to get there, can get further with a do-what-I-mean UI.
Well, with Latudio [1] a language learning app, we're 6 years in since the first line of code and we still haven't thrown in the towel even if we have little traction. But we still do those small little steps and hope they add up so we have a snowball big enough that it starts rolling by itself, perhaps, one day.
In my mind, I also had a thought that we would rise and be huge, but I let go of that one. Instead, we just put one foot in front of the other and what warms my heart are those stories like when a person in Uganda got so confident thanks to our app that he opened his own language school. For this it makes sense to continue.
What I want now is just to have a nice work/family balance and the app paying my bills and something extra. That would be a great start.
I'm not sure how I feel about this. On one hand kudos to them for the self-reflection, facing hard truths, and building a really wide set of tools.
But when you look under the hood it's tooling that wraps tooling. The API categorization tool arguably hands off a large portion of the heavy lifting to OpenAI.
"You are a world class categorizer. Fit these APIs into one of these groups."
The rest of the file is just wiring and a little blurring of the lines of model, view, and controller. I saw some testing and was like, okay this is going to be important if you are wrapping a lot of tooling because "change outside of your control" but then it's just a the default contextLoads() functional test Intellij gives that makes sure dependencies exist and nothing fails at compile.
I think the vision is there and it is definitely aligned to the Pareto principle but it feels like the idea was tested that markets aren't interested in maintaining their stuff while internally they haven't even addressed maintaining their own stuff.
Feels like a Catch 22 where if they could address that reason for themselves first then they could probably solve that for other people. But addressing it means having a product that is being used in order to feel the pain and empathize with the end user.
That said most developers donât have any awareness of problems outside of those they experience⌠which tend to be developer tooling issues. So you get a ton of companies building dev tools startups despite an incredible amount of need elsewhere.
I feel like a lot of value could be unlocked if there were some way besides random chance and networking for skilled developers looking to start something to discover people with problems, domain expertise and entrepreneurial ambition.
> if there were some way besides random chance and networking for skilled developers looking to start something to discover people
The main problem here is that non-programmers are often so entrenched in their workflow(s) that they fail to see what can be automated and wind up proposing nice-to-haves instead of tasks critical to their mission.
Moreover, they're more likely to dismiss 80% solutions because the introduction of new unknowns/things-to-check adds enough uncertainty to make them uncomfortable. "The new thing always puts things here instead of there and it doesn't handle these cases. I miss the way we used to do things."
Selling tools to developers is just hard. You are competing with a lot of OSS tools that are constantly adapting and changing. Any good ideas quickly get picked up and replicated. So, most commercial tools have a limited shelf life in terms of utility. Which makes them mostly just nice to haves.
There's a secondary problem here that many developers are employed and don't typically have a personal tools budget. This narrows the market effectively to developers that are free lancing or the bosses of developers that are employees.
The team managers will scrutinize a lot of spending on this front and typically not have. a lot of budget for this. And there is no such thing as a personal tools budget for developers in most companies.
Freelancers mostly just use the same tools as the companies that pay them. Which is mostly free tools. Non free tools actually complicate getting freelancers because now you need to worry about getting licenses for your contractors as well. So, there's a bias towards keeping things simple here and just avoiding such tools.
Not really true, but dealing with 50x 10 USD invoices is not something I want to waste time on.
Is there a business that can bundle different services with just one invoice? Or do I still have to use AWS, Azure, GCloud?
Good on you for open sourcing the code. Its destiny may yet be as a hidden gem that makes some peoples' lives better. In which case, not what I'd call a failure.
> Looking back to March 2022 when I left my job to pursue this startup full-time, I have absolutely no regrets. I knew the risksâthat failure was a very real possibilityâbut I also knew I had to take this chance. Today, even as we close this chapter, I'm grateful for the failure because it has taught me more than success ever could.
> âOur main product was an SDK Generator that could take any OpenAPI specification and generate high-quality client libraries in multiple programming languages.â
This is something I could really use! Is there a product that does this and doesnât cost an arm and a leg?
That's the official tool and has support for a lot of languages(probably the most). Granted last time I checked the generated python code wasn't great. Can't speak for other languages
Now if you want multi language generation and especially high quality you may have to spend a lot of time evaluating different choices. I decided that the official java client didn't generate very nice python code and went with https://github.com/openapi-generators/openapi-python-client even though it's a small personal project with a primary developer+random contributions from users. It just seemed nicer to use for python. Finding which generator to use especially for JavaScript seems difficult
Not every little idea, as useful as it might be, needs to turn into a hyper-growth business. Just make it an open source project on the side. If it gets popular then you get famous and hopefully some big company finds it so useful that they hire you and let you work on it full time. Konfig seems like a perfect example for this.
âItâs refreshing to see a founderâs honest postmortem that doesnât just blame âbad timingâ or âmarket conditions.â Instead, heâs ripping off the Band-Aid and laying bare the pain pointsâno hype, no quiet pivot into mediocrity. Itâs the kind of retrospective that should be required reading before your next âgrowth hackâ session: get the fundamentals right or prepare to pen your own âclosing up shopâ blog post.â
A failed startup is nothing to be embarrassed about, most of us don't have the guts to try it!
You shouldn't expect much interest in the code, the value of a company's code without the business and people is quite negative when there isn't some technical secret sauce. Even if there was some technical wizardry people would just care about understanding how that one part worked and probably not use any of the code itself.
Konfig founder here, 100% agree. I wouldn't recommend anybody to actually try to decipher/deploy Konfig for their own use. I will say that one of our customers was able to deploy our docs platform for themselves while they find a way to deal with the blowout of Konfig shutting down.
>I wouldn't recommend anybody to actually try to decipher/deploy Konfig for their own use.
This is interesting. I used to work for a mortgage start-up years ago. They built several products for banks and home builders, such as a mortgage vault and tools for signing mortgage documents online.
One condition I still remember was that bank customers required us to put our code in escrow, held by lawyers, in case the company went under. I always wondered if customers could rebuild the code, allocate more resources to develop and maintain it, or simply look for an alternative solution.
they came to us for our solution. I assumed they either couldnât build it themselves or didnât want to invest in a custom solution.
i have been involved in quite a few code escrow agreements but none that were actually used. i'd be curious to hear any stories about cases where that did happen.
in my experience it has just been a way to help business decision makers credibly claim they are managing risk when buying from a startup
I imagine that it is for either insurance or regulatory reasons. Someone upstream is nervous about the bank relying on a startup for its core infrastructure, and is only placated by knowing that the code is in escrow. They're not themselves programmers and don't know how useless the code would be without the institutional knowledge of the startup.
True, having had a few increasingly less unsuccessful startups, a thing I learned the hard way is that:
1) You should not build a tech startup unless you have either a business plan for getting revenue quickly or shit ton of investment. And you won't typically get investment unless you have at least some notion of where the business is going to be. I've made this mistake. Techies mostly don't understand the business side well enough for this to work.
2) Most companies aren't startups. They are just companies. With revenue. That pay the bills. A startup is a company without revenue that is living on borrowed time and money. Especially if that's your own money, you need a plan for this.
3) VC funded companies mostly fail. A VC's business is to ensure that those companies that are going to fail, fail quickly. They fund their VC business with the handful of companies that don't fail and succeed spectacularly. So, getting "accelerated" or "funded" doesn't mean that you are on a path to success. It actually means you are on the spot to beat the odds and that you don't have a lot of time left. Chances are that you will fail quickly.
4) If you are a successful company with revenue, you don't need VCs. So you should question why you are talking to them at all? Are you struggling to make revenue? A VC won't fix that.
5) A lot of VCs are lazy and don't get interested until you are already successful. There is a weird dynamic here where companies get funded early and then fail. Or don't get funded and then succeed.
My current company is four years into being completely bootstrapped. As in we struggle with revenue and we put in our time when able. I mostly live off consultancy that I do on the side. The company just had its third most successful year in a row and is getting close to where I should be able to retire as a consultant soonish and focus on the business instead. But it's been a long journey.
As for open source. I open source anything that is not business specific or part of our core IP. One good reason for this is that I hate rebuilding the same crap when I start my next company. I've been through this and that kind of stuff just slows you down. People obsess about intellectual property in startups. The reality is that most software is not that valuable. But you still need to spend time, money, and energy building it.
So, I contribute a lot of tools, frameworks and what not of which I am the main user. Just so I can continue to use that stuff on the next project.
from the bottom of my heart thank you @dylanhuang . Releasing it without modification gives us rare opportunity to inspect the codebase of actual startup that had paid customers. Its more valuable than polished/redacted versions.
Has there ever been a scenario where someone gave up on a startup, dumped the code, then someone picked it up and turned it into a successful business?
This isn't exactly what you mentioned, but Josh Pigford gave up on his startup Maybe, shut down the company and open sourced it. It got incredibly popular on Github, so he started it up again. (https://maybefinance.com/)
A bigger example might be Mozilla. It was a closed-source browser (Netscape Navigator), and when it was dumped, some employees petitioned to open source it. And that's how we got Firefox.
Close but not quite (and keeping some parts intentionally vague):
There was a data startup ran for ~3y until the 10 person team imploded in a tough market. Everyone left or was laid off, the office was closed, operations ceded etc. The website and some collection were still left running in zombie mode.
A couple of years later, the non-technical founder and CEO (who at this point had bought everyone else out) saw demand and PMF emerging. Mostly through serendipity, I was one of 3 people brought in to "see what we can do with it", originally intended as a 3 month project. We came in with zero context and jumped right in to figuring out the ship we were now sailing. I was able to have one or two of conversation with the previous CTO but that was about it in terms of overlap.
Things progressed and within a few months we found ourselves as co-founders of "Company v2.0". My partner took over as CEO.
I left after 2y around our series A when we were 20~30 employees and arguably a leader in our market segment. At that point there were significant and crucial parts of the stack and codebase inherited (and evolved obv) from the original efforts by the previous team. The company is now an established brand, have offices in several countries and had a successful series B last year.
Remarkable show of persistence. Honestly, I really like that the Repo is as-is. Congratulations on the journey, hope you learnt a ton. PS - you built some of your static content on Docusaurus, a Meta open source project. They're hiring like crazy. Maybe you get to work on that one.
> While we gained some traction with some startups, we ultimately weren't able to build a hyper-growth business. [âŚ] We then decided to pivot into a vertical B2B SaaS AI product [âŚ, but] we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business.
American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2â3 years after pivoting three times.
American startup culture is so weird
On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
If you told most European startup founders that in 5 years you'll have plateaued at 15-20 employees, a steady income flow, and you'll be paying yourself $200-250k a year, they'd think of that has a big success. In the US they may very well think of that as failure, especially if they are VC funded. I remember hearing a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset and he doesn't want to do business with you.
If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.
Worth pointing out that something being bad for the economy, from this perspective, isnât necessarily the same as being bad for the population. Median incomes are stagnant and quality of life is declining in the US. In part, Iâd argue this is because hyper scaling and overoptimising are squeezing the humanity out of most economic life, and most people are not benefitting from these trends.
There are exception: we need big companies to make GPUs, probably. But itâs not clear to me that this logic applies universally. Some inefficiency is probably going to be good for public wellbeing.
> Median incomes are stagnant
But they're not? Adjusted for inflation, median US household income is 18% higher than fifteen years ago and 32% higher than it was thirty years ago: https://fred.stlouisfed.org/series/MEHOINUSA672N
You could say it was stagnant from 1999 to 2015, though.
However, because big-ticket items we all buy (housing, healthcare) and items many of us buy (education, childcare) have increased much more rapidly than inflation, the overall impact has been a deterioration of financial stability for many Americans.
What about wages compared to house prices?
Some things in the "basket of goods" we use to compute inflation have gone up more than others, and housing is definitely one of them.
You can compute exactly how much by dividing https://fred.stlouisfed.org/series/MEHOINUSA646N by https://fred.stlouisfed.org/series/MSPUS Here's a sheet where I've done this: https://docs.google.com/spreadsheets/d/14NVqsKXnswG27TiwENpi...
But note that some of the change here is people building and buying larger houses as we get richer, which inflation calculations account for and this division does not.
Average rent per square foot since 2014 has increased by 42% [1]. By your unadjusted income chart, incomes have only increased by 33% in that time. In my case, existing just to the left of the income median, that's meant going from comfortably affording a 2br apartment and weekly dinner out, to barely squeaking by in a small 1br. Add in a $600 car payment (which I have managed to avoid), and it's not possible to live reasonably.
[1] https://ipropertymanagement.com/research/average-rent-by-yea...
Inflation from 15 years ago to now is 33%[0]. Inflation from 30 years to now is 107%[0]. So yeah, median incomes are dropping.
[0]: According to this calculator - https://www.usinflationcalculator.com/
You're adjusting for inflation twice. The numbers I gave in my comment, and in the chart I linked, are after inflation adjustment.
Here's the equivalent chart without inflation adjustment, which gives the (incorrect) impression of sharply rising incomes: https://fred.stlouisfed.org/series/MEHOINUSA646N
You're right, and that's 100% on me for not clicking your link.
If weâre comparing ourselves to Europe we are certainly not worse off (or anyhow the portion of the population that is worse off is not evaluating whether they should work at FAANG or a startup). Any serious discussion has to start from acknowledging that we are richer.
>Median incomes are stagnant and quality of life is declining in the US
You think it's better in Europe? Here in germany everything is going downhill fast
> we need big companies to make GPUs, probably.
we definitely don't need trillion dollar companies selling ads.
But we do want them considering our hesitation at paying for things without ads, especially when a free gmail, google maps, google drive, etc is available.
The person who you should expect (or look for) to buy your startup for $50M will reasonably expect to meet someone else in the future who will then buy the "startup" (probably at that time an established company) for $100M or maybe $200M - otherwise why would he want to buy your startup? People rarely buy startups just to extend their collection of statups ... If you build a staryup with the mindset of selling it to someone bigger - you will never grow to be the next BIG among the Big Guys. And if you are not looking to be one of the Big Guys (which implies you do not plan to sell your startup) - you can live happily on the plateau with 20 employees and a satisfying income.
> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.
Correction: it's not bad for the economy, it's bad for the investors (the only people who matter in the whole world).
I'm sure a tremendous amount of actual value in the economy has been destroyed by VCs demanding a binary result of either total failure or exponential growth.
I've learned to mentally replace "the economy" with "rich people's yacht money" whenever I read it in an online article. Make that substitution in this article, and it makes a lot more sense.
> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize.
You don't win the big price either by taking the big swings. I mean, some people do, but they are so few that they can be considered a rounding error.
Maybe the economy wins when one-in-a-million business unicorn appears, but I don't make any of my other life choices by considering the global economy either, so why would consider it here?
> On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
I don't agree. I think this is specious reasoning fueled by a mix of cargo cult mentality and survivorship bias. Just because a hand full of startups made it all the way through to a unicorn status, and some where bought out for undisclosed reasons,that means nothing on whether an idea is or can be hiper-scalable. To make matters worse, this reeks of short-term mentality that serves no purpose whatsoever other than find yet another angle to put together a kind of pump and dump scam.
I don't think any of this is the case, and you haven't really said why. Focusing on winning big is absolutely not survivorship bias. Everyone in the 100m is aiming to be the fastest human on earth, but only one will win. That's not survivorship bias. Throwing fallacy names as insults is still just insults.
> Everyone in the 100m is aiming to be the fastest human on earth, but only one will win.
This is a mental model of how things actually work that is fundamentally wrong and out of touch with reality. In any free market economy you have multiple competing businesses operating in the same market. The world is not a 100m race. Second place can still turn an fantastic profit and make everyone rich.
The 100m is not a sustainable model for a nation or world's economy. Everyone needs to eat, not just the single individual who runs fastest.
Value creation isn't a zero sum game. Increased productivity benefits everyone. Whether it hyperscales or not, genuinely profitable businesses add value to the economy. This in turn creates more opportunities for everyone willing to participate.
> Value creation isn't a zero sum game. Increased productivity benefits everyone. Whether it hyperscales or not, genuinely profitable businesses add value to the economy. This in turn creates more opportunities for everyone willing to participate.
Your comment contradicts the "hyperscale or bust" mentality. Hyperscale is not a necessary condition to be competitive. You can put out a better product/service even before economies of scale are reachable. In the meantime, this hyperscale nonsense is nothing more than cargo cult mentality where the need for a sustainable business model is replaced with hand-waving and mindlessly repeating "hyperscale" as a mantra, which has been the death of countless startups.
"Value creation" is not the same as the monopolistic paradigm of a winner-take-all 100m race. Hyperscaling is a system where potentially profitable businesses are destroyed because they weren't profitable ENOUGH for some singular VC investor class.
I agree with you that profitable businesses add value to everyone's lives, but there's a maximalist limit to the relationship where they start extracting value and opportunity overall.
Similarly, almost all of the track and field athletes always cross the finish line, regardless of placement. If your business is genuinely profitable, you should do the same. You don't have to be gold medalist if it means compromising your vision or values. If you object to the whims of investors, it may be better to focus on things you can build without their assistance. It isn't as glamorous and it may not make you a billionaire, but it does hone your ability.
Frankly, not all of the VC sphere is focused on value creation. Much of it seems focused on buzzwords and vaporware. Success in the VC world might mean keeping the hype and promises of hyperscale performance rolling long enough to successfully dump on retail. Sure, VCs and founders profit, but is it genuine value creation?
It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinely profitable value creation.
> It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinely profitable value creation.
1000% agree, thanks for the thoughtful reply
That doesn't seem in any way relevant to the point about survivorship bias. Nor to the US, whose system has if anything produced far too much food for its citizens.
> That doesn't seem in any way relevant to the point about survivorship bias.
To me, it seems exactly like the point of view that someone who wins the 100m would have.
> Nor to the US, whose system has if anything produced far too much food for its citizens.
Where people still starve, where people are still homeless, where people still live in poverty. What's your point here?
> To me, it seems exactly like the point of view that someone who wins the 100m would have.
That's just your own assumption. Who cares what any of us imagines anyone else thinks? It's not really relevant.
> Who cares what any of us imagines anyone else thinks?
Since you're responding and we're having a conversation about each other's opinions, I'd say it actually is relevant.
I would argue it is less healthy for the economy. Large companies are very good at extracting value, not necessarily producing it.
> I would argue it is less healthy for the economy. Large companies are very good at extracting value, not necessarily producing it.
I agree, but from a different point of view. Companies put out products and services aligned with their strategies. In large companies, you build up strategies that spread across multiple domains. This means that product managers need to enforce constraints that will go well beyond the concerns of the use base of their specific product. That is a net loss for the customer as the product/service they once loved is now a way to force-feed them things they do not want or care about.
Unless large companies can intercept cash before it's paid to you and take some of it, they are only getting value from providing value.
I am sure you yourself can think of some specific examples, where companies earn money without providing value.
Or are you suggesting, that every single cent that every single company earns, comes from something that actually provides value to someone (excluding shareholders)?
There's an optimum point. Too small is bad[1], too big is bad (too big to fail, regulatory capture, and sales driving out product[2]).
[1] https://asteriskmag.com/issues/07/want-growth-kill-small-bus...
[2] Steve Jobs quote: "It turns out the same thing can happen in technology companies that get monopolies, like IBM or Xerox. If you were a product person at IBM or Xerox, so you make a better copier or computer. So what? When you have monopoly market share, the company's not any more successful.
So the people that can make the company more successful are sales and marketing people, and they end up running the companies. And the product people get driven out of the decision making forums, and the companies forget what it means to make great products. [...]"
> Large companies are very good at extracting value, not necessarily producing it
Citation seriously needed. There is no argument here, merely a demonstrably false statement. A large company is literally the only kind of entity that is capable of creating entire categories of value which make up a huge percentage of the global economy. Furthermore, a lot of what many, many small businesses are doing, especially very profitable ones, is directly enabled by and entirely dependent on the existence of large businesses.
Did you use an iPhone to type this?
Everything apart from the look of the iPhone is value created by publicly funded organisations, with the exception of the transistor which was developed by at&t. And at&t were effectively a government sponsored monopoly at the time. So apple extracted value, I would argue.
Wild.
I can't think of any companies that were more product-focused than Steve Jobs' Apple. They created so much value across so many industries. They created so many transformational products.
Their machines in the 1980s revolutionized personal computing (eg they brought GUIs and the mouse to the world). The iPod let us carry thousands of songs, audiobooks, or podcasts in our pocket. iTunes changed the music industry, giving us an easy way to get the music we wanted without piracy. The iPhone put the Internet in every pocket. Honorable tangential mention: Pixar transformed kids movies and dethroned Disney.
Apple made a ton of money making products that were delightful to use that users happily pay a massive premium for. They made things that were so much more than the sum of their parts.
Publically funded means "paid for out of taxes skimmed off value created by private citizens and private corporations". The value was extracted from people by taxes. It was reused into something useful for people by Apple.
> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize.
If you do, you still won't win the big prize. The people who do win the big prize are so few, even in the US, that it's an almost certainty you won't do it. Perhaps you're right that there must be thousands of losers for even a single winner to come up, but that seems so inefficient I doubt that's really true.
Iâm not going to look for stats but as someone whoâs been in the startup scene for a long time, itâs true and the stats are probably even worse than that. Itâs totally inefficient for the entrepreneur but very efficient for the VC. One of my other observations is that the ones who do make it often come from families that have already made it and are able to leverage those connections and experiences.
This has not been my experience at all. I moved to the bay area in 2012 and 5 people I met living there have built unicorns/have net worth now around > $1BN. None of them leveraged family connections. this might be true in Europe but the best folks figure out how to move to america.
You know 5 unicorn founders? That seems pretty crazy given there's been how many in total since 2012, like around 60 from what I can find online?
> a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset
This makes sense from a VC perspective, but not from a founder perspective (for most).
> it's bad for the Economy
Economy != VCs' pockets
Were "the Economy" comprised broadly of 15-20 employee companies with a few ÂŁmillion turnover each per year, I think that could be good for it...
Yes, but SV VC are not known for being wise people you look to for life advice. It's a bit like asking for forest safety advice from drunk hunters.
This is the problem with VC culture: it's not funding good, sustainable ideas, it's basically betting.
If you can see the future you can become the best VC ever. If you can't, you're no better than VCs.
I'm actually 'stuck' in this situation right now. Make about 350-400k/year with no prospect to clear (much) more or exit. I mean, why should I exit ? To risk doing something else and 0.1% chance of making millions, or go along this way a few more years while building my investment portfolio.
> In the US they may very well think of that as failure, especially if they are VC funded
Man, if anything, this is the part thatâs weird.
Thereâs this very weird undercurrent of keeping track of who is âwinningâ in the US.
Is it not possible that someone who shepherds a hypergrowth startup to IPO, is just as of much a winner as the bootstrapped founder who has a profitable, sustainable business with a handful of employees?
I get it - everyone wants to win. But in hyper focusing on winning, you may lose sight of the fact that thereâs lots of ways to win.
The last part of this comment is the last part of Jerry Maguire, because I think Jerryâs mentor Dicky Fox has the right idea about this:
âHey, I don't have all the answers. In life, to be honest, I failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.â
People chasing such carrots on sticks are not healthy, happy nor balanced individuals. Every single one of them has something fundamentally broken deep inside, unquenchable thirst to over-compensate for that itch, which can manifest ie as greed.
In most cases in fact its just broken childhood mostly via broken father figure, source of eternal income for most psychologists since those issues are not actually fully fixable, at best they can be tamed a bit and folks brought into acceptance. Add some lower intensity mental issues and voila.
Of course neither money nor power work for such issue, but if one surrounds themselves with enough people repeating such mantras, it may eventually feel like they are right. At least for some time.
Nothing for regular folks here, unless one specifically says and feels that pursuit of happiness is not really on their agenda.
Also, would be nice if somebody compared mental issues drug consumptions US vs Europe say split by jobs. I literally know 0 people, peers, IT colleagues nor friends who take anything on mental health, we are just bunch of relatively happy balanced folks here who are not in frequent dread over some bigger protracted health issue that can wipe one out, don't have to worry about saving up a million or two for out kids universities, have enough time to relax on vacations, fully paid sick days etc. Once one is not desperately poor, this is how proper quality of life looks like, not some numbers on accounts.
I think you have a kernel of insight in this take, but I have to be frank: I really donât think you frame this or phrase it in a very kind or generous way.
I say this as someone who has personally experienced the kind of struggles you talk about in such unflattering terms. (I lost my dad to heart failure at age 7, and have struggled with major depression for most of my adult life.)
Well to be honest, you could be earning that much money somewhere else with a lot less stress and insecurity.
Doesn't this thinking also lead to the eventual enshittification of their product? Hyperscalar growth will eventually stop. At that point to justify your valuation you need to start screwing over customers
It also means that, as a customer, you are utterly fucked because almost everyone you want to do business with or buy things from could potentially disappear in a few years because bootstrapping isn't exciting enough for the VC fucks. "Enshittification" runs rampant because literally EVERYONE is swinging for the fences, even when they shouldnt be.
What big prize? Having way more money than I know what to do with? I genuinely don't get what the reward even means to me as a human here
This is whatâs wrong with this country. We are run by a ruling class that only sees a profit. Screw sustainability, I (âSV VCâ) just want 100X off my $1M initial investment, bro. Either hYpErScAlE or fuck off.
Taking VC money is a poison pill.
Sometimes the priority appears to be hitting all of the latest buzzwords. Customers and long term revenue may not be as important as dumping on retail with an IPO or tokens. The promise of "hyperscale" performance becomes more valuable than tangibles. Which is the same as saying, demonstrating tangible performance is undesirable, if it detracts from the narrative of "hyperscale".
Swinging big or not, the odds of (by definition of startup) "failure" are high. Therefore, you might as well swing big. A swing small experiment that doesn't connect is still a "failure".
Put another way, there is an endless supply of noise (read: competition for attention). If you're not swinging big enough to cut through that clutter odds are good you're just adding to the clutter. That's going to be an endless struggle.
Less risk is actually more risk.
âLess risk is actually more risk.â - Maybe the title of Nassim Talebs next book?
how is that bad for the economy?
> On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
was it? Or the inability of other countries to block US startups (because the US government will never let them) makes it impossible for local startups to compete leading to monopolies? If every country went US way of blocking TikTok, the hyper-scale growth would cease to exist fast.
Your statement seems to assume that non-US startups are intrinsically worse than US ones. Why is that?
Money from customers of all non-US countries is the biggest reason. Where US tech companies can't grow, local alternatives grow to the same level (China, Russia).
> And while this might be healthier for you as an individual, it's bad for the Economy.
... an while it's bad for the economy, it may be good for the country. Notice how Europe doesn't have regular school shootings, rampant crime or 100k people a year killing themselves with Fentanyl. It may have something to do with culture that prioritizes other things besides the economy.
My impression is that many profitable small businesses (small teams, long-term goals, which can be considered even boring) don't make it to the front page of HN because they don't aim (unrealistically) high. I find it fascinating how this culture embraces a "move fast, break things" mentality, which seems to apply (only) to the tech industry, where someone with multiple failed businesses is often labeled a "serial entrepreneur" (selling unsustainable company I don't consider a success). It's amusing to think about what it would be like if someone failed in multiple sports and referred to themselves as a "serial sportsman."
The problem is that once you take the VC coin, you are pushed towards hyper-scale. If you don't take the VC coin it's a much harder and longer path to self-sustainability, unless you have some way to fund yourself e.g. consulting. 37 Signals is the model here, but they are super-exceptional (they created Rails, after all).
Then having got there, a VC-funded competitor will just roll over you as they'll have better connections and funding.
I am in Europe and I work for a company that has exactly the same struggles.
Sales cycles for B2B for big players are insane - price points to offer our stuff to small/medium businesses are not enough.
Even if we provide value and save time for customers it still is hard work all the times to explain the value.
Well the grass is greener on the other side - but I can see how having B2B business where for years you have the same struggles just to keep the lights on and every month is the same and you have the same conversations but with different customers explaining 10x a year exactly the same thing - why you provide the value ââ is just something people donât want to get stuck into and can lead to burnout rather quickly.
So I can see how someone would like to land business idea where the value is obvious and people scream âtake my moneyâ.
There's a couple of factors that play into why companies in the west tend to scale vertically rather than horizontally.
The first is looking for a return on investment. If you're going to attract other peoples' money, those "other people" are obviously looking for companies that are going to provide a return. And since a wise investor diversifies their portfolios, they know that a lot of their investments are going to fail, so one way to hedge that is by encouraging all of their investments to grow as much as possible. That way a small number of hyper-performers will make up for the losses.
But we also see vertical growth happen with major corporations as well. Not just startups. And I suspect this has a lot of to do with red tape, over-regulation and bureaucracy. When you need to jump through tons of hoops including getting licensing and permits, setting up tax and payroll accounts... not to mention if you want your company to be publicly traded and the hoops you need to jump through for that ... it can be way cheaper and lower-risk to expand the activities of an existing, already established company than to spin off a new one.
This has become a thing in academia too.
Small projects asking interesting questions will be laughed out of the room, labelled as lack of "ambition". The fact that not all interesting questions require 4-5 years and millions of dollars to be answered seems to not bother people paying the bills.
> and not shut down after 2â3 years after pivoting three times.
An important part of running a business is taking a risk.
Furthermore, plenty of businesses fail for reasons that have little to do with the economic value / needed functionality of the product. In some cases, it takes a similar company with subtle differences (or even timing) to really understand why one business failed and a different succeeded.
(One very bad example could be the difference between Sega and Nintendo in the 1980s and 1990s. Compare the NES to the Master System, the SNES to the genisis, and the Game Boy to the Game Gear.)
(Another example can come from comparing Tesla to the dozens of other electric car startups.)
> American startup culture is so weird.
But it works for the USA. Most, if not all the start ups that matter, originate in the US and a lot of them are the unicorns we all use daily like TSLA, GOOG, NFLX, MSFT, META, etc.
And the founders are natives and immigrants, so it is not a demographics issue. It is more of a process issue for the rest of the world.
> Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2â3 years after pivoting three times.
How do you get the moon, if you don't aim for the moon? Risk == Reward. When you don't risk, you end up with startups like in DE e.g. Auctionata, Moped, etc.
> American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2â3 years after pivoting three times.
This is just the culture in unreasonable VC scenarios. Most new companies are not VC backed and have realistic expectations on the new business.
I don't understand this criticism. Most businesses aren't hyperscale. Some businesses are hyperscale because that's what people want to invest in.
If you take vc money thatâs the deal.
What's weird is wasting your time and life on something not worth your time.
Thank VCs who only exist to find a unicorn to keep their LPs investing so they can charge their 2 and 20.
> American startup culture
American VC-backed startup culture, you mean. And yeah, that makes sense. If you put money into something you expect to get paid back in 5 years. You need growth to do that.
If you want to go slow, then you bootstrap your startup.
> Not everything needs to be a hyper-scaler
It does if you want to take a few $m of someone elseâs cash, pre-revenue, which is what these startup founders want.
> While we gained some traction with some startups, we ultimately weren't able to build a hyper-growth business.
>"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business."
How many wonderful niche products would be around if their owners had tried for a small business instead of a 'huge business' with 'hyper growth'?
People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
You need to sell a lot of 10$/month licenses for it to even viable to a 2-3 people startup in a developed country. There is also the cost of opportunity to consider in that.
I don't understand why people even think about selling $10/mo licenses.
Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
Customer problem discovery is easier, you get reputation network effects within the vertical, you gain trust because you learn the industry lingo, you can actually solve peoples' problems because you're not balancing needs against unrelated industries, they're willing to pay, and once you get 20 customers you're doing pretty OK.
> Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
Iâve successfully done exactly this.
Except in order to get there, we had to spend 3-4 years selling cheap $29/mo self-serve plans at volume to iron out all of the kinks in the product and UX. Only after that were we able to go upmarket selling $40-90k/yr contracts.
It all boils down to the fact that customers paying $20k/yr or more have extremely high expectations across the board. Itâs extremely difficult to just pop into a completely new market with a brand new product untested by anyone, and expect large companies to trust and buy from you.
True and what I find funny is that the same companies are often willing to pay a lot of money to consultants that will deliver a shitty streamlit POC. Like they will literally pay consultants the equivalent of 4 years of new SaaS cost to get a POC instead of using a product with rough edges and grow with it. Expectations can be really dumb and confusing.
I'd pay to buy a bad house and then spend money to improve it, rather than paying a full rent for the same bad house and hoping that the landlord uses that money to improve it.
I don't get the comparison. are you comparing a SaaS that is doing 70% of the job and a shitty streamlit POC that no more than 3 people can use in parallel ??
We experienced something similar - we were able to wrangle a $30k/year contract as one of our first contracts, but the expectations around the software were and continue to be incredibly high - we sort of wish he had had a few $100/mo customers first to iron out the UX, and just learn more about how to work with a midmarket/enterprise buyer.
Anyway we survived but we understand why companies move upmarket over time now haha.
Yeah exactly. You can't just roll out of bed one morning and grustle out a stable enterprise application. Also:
> customers paying $20k/yr or more have extremely high expectations across the board.
They definitely do, in certain ways. But also a lot of the software companies use sucks shit. But this part of the other comment cracked me up.
> a medium sized traditional industry that has ancient, crummy software
This is actually how to do it but the thing they're leaving out is that you have to already have knowledge of the specific industry and its players, their niches, and the software they use within them. You have to know where standards are high, and where the current options are bad, and how to market that improvement to the companies that are juuuust flexible enough to switch to your product while being conservative enough not to dump you if exactly one VP leaves.
Once you have all that in place, sure, you can "just" sell your software to them lol.
>This is actually how to do it but the thing they're leaving out is that you have to already have knowledge of the specific industry and its players, their niches, and the software they use within them.
In most cases, this requires at least one former employee who used the crummy software. Most likely this person would be the one to identify the problem and propose an alternative solution.
Information like this is extremely valuable. It forms the core of the biz opportunity. Casual comments often overlook this.
Builders doing their own thing may not overlap with employees using office horror software 9-5.
Boiled down into 1 sentence: Create a company that solves a problem youâve personally experienced.
(If you feel like you havenât experienced any problems worth creating a company to fix, consider putting yourself in situations where youâll be exposed to different/new problem sets)
Yes, get industry experience! You have to be pretty special to be just a software developer with no domain knowledge who can somehow make something more valuable than the bazillion other just-a-software-developers out there. I sell fairly high priced software to companies and I'm doing fine. Though I'm kind of lucky in how I got into it and by now most of my domain knowledge has come from my previous customers asking for things.
>Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
As if that is easy.
The guy is so out of touch it's like a cartoon. Like, right, why did they think of that?! Just create something that's worth several thousands a month instead of a small value product!!! And get all the big companies who can actually afford that kind of thing to buy your product!!! How hard can that be?
I didn't say it's easy, and it's probably not the right fit for you. But it's at least a plan with a good end-game, which a lot of $10/mo online only business models simply cannot turn into something viable.
50-1,000 person companies aren't actually that big. You can get to know the decision makers and it's not like navigating 20,000 person corporate mazes (also possible if you have the stomach for it).
It does seriously benefit from industry knowledge though. The reason so many people think it's a ridiculous pipedream is because they have no industry experience outside of tech, and that's a big problem -- a solvable one, but most people will never do what it takes to solve it and instead say that it's not possible.
It takes a lot of willingness to do non-tech things though. You can't just set up an online marketing funnel and watch the cash come in. It's relationship driven. The advantage of going after a vertical is that the relationships start feeding each other -- you get social proof within the niche industry. And you don't compete with VC-backed software companies as much because they much prefer horizontal solutions (which can get bigger and achieve bigger exits) versus vertical solutions.
The only times I've seen anything remotely like that work, it's a situation like this: Two engineers work together at company A, become friends and gain experience in the domain. Both move on, progress in their careers and work other companies in the same domain. They meet for coffee and person 1 says: "hey remember that problem we had at A? I see it again at B", person 2: "me too and I've been working on a side project to fix it, you should totally buy the solution from me". And voilĂ . Could a kid right out of school build the same thing? Sure. Would it have ever succeeded? No. They lack the domain experience and the social connections to do it.
I've heard this story dozens of times now.
And that's almost exactly how the company I work for started.
Hell, I went straight for 20k/mo (average) with my SaaS.
The key is providing a good value proposition. My software would save my customers more than they would spend on it yearly, while outsourcing $50-300k/year in salary worth of work that previously had to be done in internally (usually incorrectly).
You always need to solve an actual business problem that people are willing to pay to fix.
Would you be willing to share insights and help with mentoring in private. I'm going this path (building SaaS) and would appreciate someone with experience to share to discuss topic.
There's gotta be a name for this fallacy. "This enterprise software sucks and is extremely expensive, so we will build something that is actually good and become billionaires!"
This is the graveyard of engineer driven startups in the enterprise space, who make the mistake of thinking that software quality matters. The fact is it is not a top priority, if it is even a priority at all.
In the enterprise space, if you're not a Fortune 500 company, all that matters is 'relationships', by which I mean sleazy sales processes (or actual nepotistic friends-and-family relationships).
Joel Spolsky wrote a great essay once about why there is no software priced between $1000 and $100,000. Because above $1000 you need a sales team that takes purchasing managers to strip clubs and play golf with CEOs, and that shit adds up. On the plus side, your software can be dogshit, like the stuff you work with every day.
Exactly.
Only engineer and product oriented types think that quality has any actual value. Unfortunately it does not, even less so if your only USP is "quality". If your products only differentiator is that it's technically better than the competitor it really needs to be 100x better in order to sway anyone's interest.
If your maximum work/effort you can put into any project is 100% which you have to allocate into fragments, the product person will put 80% into product development and 20% to marketing but a sales person will put 80% into marketing and 20% into development and unfortunately the latter will product much better results. All it needs to be is "good enough" but reaching to your target market with the right product really is the key.
The unfortunate side effect is that quality is best achieved by having the PR team write it out and put it into a snappy slogan on your product website. Done. Quality achieved.
Edit: And the above applies to your typical non-safety critical Saas, Enterprise, B2B, B2C software. And thinking back to for example the Boeing crashes it likely also applies to the the "safety critical" software/systems as well...
> there is no software priced between $1000 and $100,000
Nitpick, but this is the price range for most professional film restoration software.
The target is often small restoration houses with workstations at 10 or so seats.
The world has changed. Today you can sell software for $5000 or $10000 without any sales process. Not always of course, you have to find the right niche.
Cool, says everyone... Have you done it?
Yes. But it's not for everyone, especially not for a lot of engineers.
Many of these buyers feel more comfortable meeting you in-person, so going to trade shows, writing articles for niche trade publications, and sometimes doing site visits are all very helpful. So is cold calling.
Sales cycles are often slow. You have to get used to customers taking months to decide, having lots of meetings with different stakeholders, and to get good at telling the difference between those who need a lot of meetings but will likely close versus those who will never do anything. It's a very different game than selling subs online, which I know little about.
The product does need to be decent but I disagree with others that it has to be amazing. Most enterprise software is horrible. They will be delighted if you actually solve their problems (rather than the problems horizontally-oriented software vendors want their customers to have), even if it has some rough edges, as long as you're very customer-focused, responsive, and available.
But it also tends to be durable revenue, because you get tightly integrated into their operations if you do it right.
Done that with $25k saas.
The one point where gp is wrong is you really can't sell $4k things; $10k min and $25k is better. eg a good to great salesperson closes 25% of deals, so you have the cost of 4 mqls per one close, and then the salesperson gets 20%ish of the deal.
This is a solid plan, thanks.
Using B2C pricing for B2B SaaS is a big headwind.
Recipe for your SaaS always being a hobby
Just gotta find that price point within discretionary spending where a manager can OK the cost without having to get a VP to sign off on it. It's definitely way higher than $10/mo.
Pricing really is key here. $10/month is very hard for most businesses. Depending on your situation, you need to find the "sweet spot" that matches your markets budget, while also making the math work in terms of your revenue needs.
For example, you could try to find 100 customers paying you $500 per month, and do OK with a small team. The alternative, of $10 a month, means you would need 5,000 customers, which could be impossible, depending on the circumstances.
Small businesses focused on bootstrapping should also be aiming for revenue within months, and not 3-5 years. But that's another topic entirely
>> How many wonderful niche products would be around if their owners had tried for a small business instead of a 'huge business' with 'hyper growth'?
> People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
Isn't that a better outcome than putting in exactly the same effort but winding up with a totally failed business (i.e. nothing).
> it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
I agree and I disagree.
It is hard to bootstrap a product. It's even harder to bootstrap a product that folks want to buy. It's even harder to do that when the prevailing wisdom on this (and other tech sites) is to go the VC-funded route.
The VC funded route -- for the vast, vast, vast majority of software businesses ends up being the exact same as the bootstrapped route -- except that you lose one avenue when you find out your business isn't "hyper-growth" or isn't going to be a huge as you claimed in your pitchdeck to the VCs. You lose the ability to pare back and to be what is described as a "lifestyle business". On failure, the business gets sold or stripped for parts, unless the founder can somehow get the VCs to agree to let them 'buy it back' or write-off their investment and give it back.
Bootstrapping means taking that risk on yourself; but it also means control over your options, and that is one fundamental strength to bootstrapping you don't get with VC funded startups.
Absolutely, it's no salary or the aptly named ramen profitability for a long time if your marketing is not aligned with the folks that will buy your software, or if your software really is just selling a solution to a problem no one actually cares about.
The 'hard part' isn't the engineering. It isn't the technology. The hard part is the marketing -- the connecting the hopefully expensive problem you solve to the right folks who want to buy that solution.
To your second part, I wholly agree that selling $10/month licenses is not a viable way forward if you want to be anything more than a solopreneuer.
But to do that, you need to hone your positioning so that you get in front of the folks with money who need to solve the problem your solution solves.
In your case, it looks like you run a web-auditing tool (according to your bio) called caido.io; and it looks like you're targetting basically everyone who needs to audit a website.
In the thought that "there are more fish in the ocean so why not fish there", that is a seemingly sound idea.
But you don't really want to spend your time trying to fish in the ocean if you have a barrel you could fish in and get the same result... dinner. (I did not come up with this metaphor, that was Jonathan Stark -- who writes a lot about positioning in this context).
The question you have to ask yourself is, are you positioning your product so that the CISOs or the large cyber-security firms would want to buy it? And if you did, do you think they'd trust your product at a mere $25 per month?
Anyway, the point to all this is that the problem is learning how to position the thing you build and get it in front of the right folks, and that's a marketing problem, not a technology problem, and that's something that we as engineers have ignored for far too long collectively.
I wish you the best of luck with your product -- we need more small software businesses in this world!
If you need funding to cover your monthly nut, you need a plausible path to hyper-growth; the portfolio math doesn't work for investors otherwise. If you set out to build a small-scale sustainable business, and you succeed, you can avoid funding. But if you're pivoting to something entirely new mid-to-late-ways through your company, you've probably burned down most of your reserves.
> monthly nut
Strongly recommend checking urban dictionary before using that in Australia :D or you'll get some amused comments
> If you need funding to cover your monthly nut
You can get funding for that?!
Before 2022, that would have been series B material.
Yes. Most of what early vc practically pays for is salaries (and a lot of that is really just a passthrough to landlords because California is an incompetent state run by incompetent people.)
I believe you just had a "whoosh" moment.
That's what I get for reading literally. sigh.
You can take solace from the fact that you've made quite a few people sensibly chuckle in cafes around the world.
haha this is why I love HN
the landlords beg to differ. to them it's a great country, run very competently.
private tax (rent for soil bound property is nothing but a private tax) is the best thing since aristocracy and tithing.
> If you need funding to cover your monthly nut, you need a plausible path to hyper-growth; the portfolio math doesn't work for investors otherwise.
If you only look towards people like Peter Thiel, sure. But the people that cleaned up his mess with SVB aren't so insane.
No, it's true of more or less any investor.
>your monthly nut
That means... something different where I come from.
Are you using it to mean "monthly fixed costs"? I haven't come across that meaning before.
It's a gambling term, it means the amount you have to win to break even.
it's a loan sharking term, every week you hold the nut, you owe the vig
"Covering your nut", or "earning your nut" basically means selling enough to cover your expenses.
I hear it some from business or sales types in the US most often.
It just doesn't make any sense when you can go to work for a big company and get that kind of outcome without all the risk.
It does if you aren't a big company person.
I suspect the majority of entrepreneurs aren't doing it for the money, they are doing it because they don't fit the traditional corporate mould. The people the media loves to focus on are the outliers.
Schumpeter had some interesting insights on this: https://reactionwheel.net/2019/01/schumpeter-on-strategy.htm...
Also, for some of us, building your own company is much less risky than working for a company.
No matter how comfortable or secure you feel in your job, sudden layoffs can and do happen. Also, what if you develop an illness that makes you unable to work?
Having your company means you can make money while you sleep, you answer to the market (which on average is somewhat "rational") rather than to a (possibly capricious) boss, you get to grapple with a wide range of interesting challenges that take you out of your comfort zone and lead to personal growth, and so on.
As long as you are able to build a company that provides income at least comparable to what you would make at a job, I think the benefits are numerous. It is not for everyone though.
Maybe my understanding of "big company" salaries are skewed but I imagine there's a profitable middle ground between big company salary and hypergrowth? As long as one isn't taking VC money at least
On the flip side, I can't say I'm super sure what "hypergrowth" means, it's a rate of growth but I guess what really Matters is some expected valuation/market cap kinda thing
pretty hard beating riskless 500k+ TC without having equity in a hypergrowth company.
Isn't 500k+ TC on the upper upper end of the salary distribution though? Vs equity in a rapid growth 20% CAGR or somethin? Or hypergrowth that caps out around 2M ARR?
I guess I'm just trying to gain some career perspective on this heavily bootstrapped startup I'm at thats targeting the alt-thread-mentioned "medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people." and whether it's really worth it for me
I wonder how the probability of securing such a job - with huge layoffs lately and increased competition - compares to the probability of business success. There's unemployed engineers grinding at system design and algorithms 10 hours a day for at least half a year to get an interview. If I'm going to spend hundreds of person hours on something, I think I'd rather start a company to be honest. Additionally, internationally those levels of pay are incredibly rare.
Yeah I have been wondering this myself as well. I'm one of 3 co-founders in a bootstrapped company doing consultancy for a few years in a LCOL area. We have been paying founders 50k/year salaries for the life of the company. We haven't been especially lucky and we haven't been super brilliant in our business decisions. Yet we are doing fairly well.
This year we made 400k revenue, 150k profit and 40% growth. Our sales prospect are a lot better than at the start of the year. So I'm expecting to have another strong year of growth next year. Also we are nowhere near saturating the market and can have strong growth for many years to come.
Salary + 1/3 of profits is equal to 100k for this year. 40% growth doubles the company every 2 years, If everything goes well just salary + profits will grow very nicely. Then on top of this come the exit opportunities where founders will make millions.
Product and service businesses are very very very different things. Service you get immediate cashflow but the thing doesn't scale past the humans. Software scales infinitely in theory, but it takes a lot of time to build before you even get 1$ out of it.
You can hire people into consultancy business and grow it like any other business. Sure it won't become the next magnificent seven, but you can grow it enough that you can make a lot of money.
For example, there exist plenty of consultancy companies that have 10million revenue. That would be 20x growth for us. In practice that would mean 500k - 1m yearly income for founders in our case. On top of that the company probably could be sold for 30m - 100m.
With typical vc dilution founders need to grow a very successful product company to earn similar amounts of money. There are plenty of examples of unicorn exits where the founder team has made less.
I've know quite a few businesses that started with services then transitioned into product. Once you have enough domain knowledge it is the obvious next step.
'Just' making money is not very hard in IT. We have been for decades and it's only growing; we do emergency software fixes which means we can ask whatever. We do not, we have a high hourly rate but it is usually clear what it will cost. We don't grow because I do not want a big company and good people are almost impossible to find, but there are way too many projects as, and I know HN doesn't believe this in a survivor bias kind of way, software is getting worse very fast (thanks node and python; and we used to laugh at php; that's more or less a joy these days) so our regular clients are calling more often year after year and new clients come in at a rate I don't care for. But the dream still is products, not consulting; I sold my first product company 25 years ago; I shouldn't have. Nice money but I want it back; consulting is nice and we make a lot for the past 25 years, but making products is nicer so we are now doing 50/50 products vs consulting and hoping it will work. We don't have to work for decades already but why not if it's fun?
There seems to be a subtext here of âsee? I told you it was hard!â
Nothing wrong with setting out to build a Google instead of a Basecamp. Theyâre different kinds of company.
If anything itâs easy to underestimate the risk of building a low-risk business. Theyâre all hard.
Kudos to Konfig!
> Nothing wrong with setting out to build a Google
Sure there is. The probability of success is as good as zero. In all seriousness, a better business model is buying $1000 a month in lottery tickets. You have the same chance of success, you can do it on the side while working your job, and if you do hit the jackpot you don't have to do any additional work. This particular business has no path to being a Google but it might have a shot at being a Basecamp.
Your mental model of startups is a lottery?
Even the Marxist analysis would say itâs about privilege, access, and exploitation. Not âprobabilityâ.
Considering well connected people with startup know-how and experience in the Bay Area, I would say they do pretty well with serious startup projects.
> Your mental model of startups is a lottery?
No, but that's how anyone should think about startups that are "Google or nothing". Not even Google started that way.
There is rather a lot of probability involved, and the odds change dramatically depending on the kind of business youâre trying to launch.
When you start making a product and trying to sell it when do the dice rolls come in?
Every step of the way.
- right product?
- right market segment?
- right marketing?
- right execution?
- right scalability post basic execution?
- right sales approach?
- right post sales approach?
All of these have 10 different paths (in reality), any of which if you take the wrong one could end up in some kind of expensive dead end or spectacular failure.
Probability models are an attempt to cope with a lack of information. But you not having complete information doesnât mean the world is like that.
Do you think itâs possible for anyone to have all the information?
You are zooming out, and when you look at an abstraction from a distance it's easy to miss the details and just boil it down to probablities.
The reality is that you measure and get information on all of these things to determine more accurately what odds you have. The act of measurement changes the probabilities, because if you do it right you will know more than you did before.
However the measurement has to be done right or it will mislead and will take time, which your competitor uses to overtake or at least counter you.
And sometimes you start in a place (or take directions into a place) which put you at such a disadvantage with competitors that you canât âwinâ. Itâs rare you can know that while itâs happening though.
In theory all these things are controllable and no problem is unsolvable. Sometimes itâs even true (post-facto however, more often than not). That view is often the best for succeeding (or more precisely, NOT having that view often puts one at a disadvantage when it comes to succeeding).
But the probabilities are often the more accurate model. That is often the best model for deciding if you want to take a bet, or for comforting yourself later if it doesnât actually work out perfectly. It really doesnât help though (most of the time) with actually doing successfully.
As a customer of Konfig, I am super bummed about this. I think we may even have been their first customer (referenced in the init commit). Dylan and Anh-Tuan solved a number of real problems for us, and they did it spectacularly. They essentially provided a one-stop-shop for generated SDKs and beautiful hosted docs/tutorials that would call our API and immediately allow users to start playing with real data. Prior to Konfig, we were hand-writing a hodgepodge of SDKs to wrap our API and using ReadMe to host the docs (which never quite worked interactively with our API due to request signing that we require on our API).
We're self-hosting the docs now thanks to Konfig open-sourcing it: https://docs.snaptrade.com/
Tons of respect for these guys and I wish they'd found a way to make it work.
Also, for anyone finding themselves in a similar situation as Konfig (a product that (some? most? all?) customers love, but revenue not scaling as needed), please consider charging more. We probably would have paid 2-3x what Konfig was charging us and more as we grow, but they never asked and never built in any usage-based cost scaling (like $X/month/SDK, $Y/month/demo, etc).
I got to know about konfig from your product itself. The docs were(maybe still are?) so good that I had to check what was behind it. It really is better than swagger/redoc.
If you want a lightweight API docs replacement, I'd recommend Scalar. Simple and easy to use, but so much better than Swagger docs...
Did you try to use https://github.com/OpenAPITools/openapi-generator directly?
There are multiple open-source tools backed by large companies to do this. I use one of them for my sdks. So I can really understand how they could struggle to sell it, it's a hard sale to sell someone a commercial product that does pretty much the same as free open-source projects. I was tempted to check it out but as bad as it sounds even with it being open source and free I couldn't find a reason to spend the time over just using what I have now.
The product in TFA is a wrapper around the tool I linked, plus some stuff for docs and so on.
Wrapping free software is mainly viable towards enterprise customers, where the thing you're actually selling is SLA and a certain level of insurance and sexiness on middle manager CV:s and so on.
Oh, it looks like we were competitors! I'm the founder of ReadMe.com, and we do API docs (as well as SDKs and more).
I don't really know why, specifically, we ended up being successful. I know I also had a lot of false starts â slightly iterating on the core idea until I hit something people were visibly excited about. I also knew it was a hard market, so I put a lot of my time and effort into non-engineering things. Hacker News was always good to us, especially as I was more vulnerable.
I'd love to hear more! I'm going to reach out privately :)
Overall, though, congrats on all the work you put in. It's incredibly hard to start a company and believe in yourself, and you should be proud!
You might have been successful, compared to konfig, because it looks like you had an 8-year headstart. It could be that konfig was a fine idea and well executed, just not at the right time.
Maybe, but thereâs a number of companies in the SDK space that popped up the past 3 years and are seemingly successful. And there were a number of companies back when we started that are no longer around.
This was super wholesome and made my day
:-)
Thank you for sharing.
>"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business."
I think we are unfortunately going to see this outcome appear a lot in the near future as the AI bubble pops
Am I the only one who would respect the effort more if it had instead been written like so?
>We then decided to try using generative AI in a vertical B2B SaaS product, believing we could solve previously unsolved problems this way. We came up with and pitched multiple ideas, but user feedback was never positive enough to give us confidence that we were on the right track to build a huge business.
As is, my first impression is something like: "Jeez, whoever wrote this is firmly embedded in a niche fly-by-night culture that instinctively turns me off, and now can't psychologically shake free even immediately after crashing and burning".
Open sourcing your code and giving up is the ultimate pivot to AI - the new models will learn what you did and someday do it better (?).
This is not the first story I've heard of a product that isn't quite right, but when deciding where to pivot, fell into AI as the answer and then failed. I've said it before, but it bears repeating - when we figure out what AI is good at and what it is not, we will start treating it as a tool instead of a goal, and our product ideation will stabilize.
> when we figure out what AI is good at and what it is not
We know. It's good at making stuff up. It's bad at facts or for generating things that withstand scrutiny.
What we donât understand yet is what that means. We have never had such a thing before and itâs not clear what the patterns are that will make the best use of its known attributes with the least exposure to downsides â whether those be related to the tools, the end users, or the business stakeholders, or any other parties. Volumes more nuance to understand, and weâre just getting started.
The product itself is fine. I was part of a startup that was happy to pay for said thing and got a lot of value from it (sdk from OpenAPI spec). So I donât think product market fit was the problem here.
The concept of an API should go away and we should just have AI's talk to each other in plain language.
Are you saying AI can't rescue a bad product idea by automating things? Like more efficiently doing something nobody wants done isn't a business?
Not OP, but this isn't what Konfig did. They didn't try and rescue a bad idea by automating things. They attempted an AI focussed pivot.
Using AI to automate things to rescue a failing product idea is kind of treating AI as a tool. But AI won't fix a bad product idea.
The problem is, people do want the product that the author was originally selling. A high quality SDK from OpenAPI spec is specifically a product that well funded YC startup I used to work for paid for. So I would contest the characterization that it was a bad idea.
My opinion: In software, the best use of AI is to create a do-what-I-mean UI. That is so-called AI (more to the point, use of LLMs and vision, speech, and audio processing) can allow new modes of interface that help a user operate the computer and achieve something that was nearly impossible with the user at the raw controls.
This will not produce superior work to someone who knows what they're doing at the controls. A competent programmer doesn't need this. An excellent touch typist doesn't need this. But let's say someone who has a vague idea of what outcome they want, but an incomplete understanding of the mechanisms to get there, can get further with a do-what-I-mean UI.
As long as the consequences of then producing something which was not-quite-what-they-mean but them being unable to recognize that are not too high.
Probably true with a more nuanced definition of "knowing what you're doing". I'm pretty good at writing code, Cursor is faster.
Well, with Latudio [1] a language learning app, we're 6 years in since the first line of code and we still haven't thrown in the towel even if we have little traction. But we still do those small little steps and hope they add up so we have a snowball big enough that it starts rolling by itself, perhaps, one day.
In my mind, I also had a thought that we would rise and be huge, but I let go of that one. Instead, we just put one foot in front of the other and what warms my heart are those stories like when a person in Uganda got so confident thanks to our app that he opened his own language school. For this it makes sense to continue.
What I want now is just to have a nice work/family balance and the app paying my bills and something extra. That would be a great start.
[1] https://www.latudio.com
I'm not sure how I feel about this. On one hand kudos to them for the self-reflection, facing hard truths, and building a really wide set of tools.
But when you look under the hood it's tooling that wraps tooling. The API categorization tool arguably hands off a large portion of the heavy lifting to OpenAI.
"You are a world class categorizer. Fit these APIs into one of these groups."
The rest of the file is just wiring and a little blurring of the lines of model, view, and controller. I saw some testing and was like, okay this is going to be important if you are wrapping a lot of tooling because "change outside of your control" but then it's just a the default contextLoads() functional test Intellij gives that makes sure dependencies exist and nothing fails at compile.
I think the vision is there and it is definitely aligned to the Pareto principle but it feels like the idea was tested that markets aren't interested in maintaining their stuff while internally they haven't even addressed maintaining their own stuff.
Feels like a Catch 22 where if they could address that reason for themselves first then they could probably solve that for other people. But addressing it means having a product that is being used in order to feel the pain and empathize with the end user.
I would prefer to build a sustainable business and live a calm life. :D
The developer tools market is REALLY difficult.
Nearly every architecture decision is "which open source tool can I use to solve [problem]".
No one wants to pay for anything and that's ok.
That said most developers donât have any awareness of problems outside of those they experience⌠which tend to be developer tooling issues. So you get a ton of companies building dev tools startups despite an incredible amount of need elsewhere.
I feel like a lot of value could be unlocked if there were some way besides random chance and networking for skilled developers looking to start something to discover people with problems, domain expertise and entrepreneurial ambition.
> if there were some way besides random chance and networking for skilled developers looking to start something to discover people
The main problem here is that non-programmers are often so entrenched in their workflow(s) that they fail to see what can be automated and wind up proposing nice-to-haves instead of tasks critical to their mission.
Moreover, they're more likely to dismiss 80% solutions because the introduction of new unknowns/things-to-check adds enough uncertainty to make them uncomfortable. "The new thing always puts things here instead of there and it doesn't handle these cases. I miss the way we used to do things."
Selling tools to developers is just hard. You are competing with a lot of OSS tools that are constantly adapting and changing. Any good ideas quickly get picked up and replicated. So, most commercial tools have a limited shelf life in terms of utility. Which makes them mostly just nice to haves.
There's a secondary problem here that many developers are employed and don't typically have a personal tools budget. This narrows the market effectively to developers that are free lancing or the bosses of developers that are employees.
The team managers will scrutinize a lot of spending on this front and typically not have. a lot of budget for this. And there is no such thing as a personal tools budget for developers in most companies.
Freelancers mostly just use the same tools as the companies that pay them. Which is mostly free tools. Non free tools actually complicate getting freelancers because now you need to worry about getting licenses for your contractors as well. So, there's a bias towards keeping things simple here and just avoiding such tools.
Not really true, but dealing with 50x 10 USD invoices is not something I want to waste time on. Is there a business that can bundle different services with just one invoice? Or do I still have to use AWS, Azure, GCloud?
Good on you for open sourcing the code. Its destiny may yet be as a hidden gem that makes some peoples' lives better. In which case, not what I'd call a failure.
Admiring your courage in dumping your repo raw and uncut.
I agree, this was a really touching admission:
> Looking back to March 2022 when I left my job to pursue this startup full-time, I have absolutely no regrets. I knew the risksâthat failure was a very real possibilityâbut I also knew I had to take this chance. Today, even as we close this chapter, I'm grateful for the failure because it has taught me more than success ever could.
Although the code dump could be interesting, this appears to have no license attached. Making it properly open source would make it a lot more useful.
An MIT LICENSE file was added about an hour after your comment.
Fantastic, that's great:)
> âOur main product was an SDK Generator that could take any OpenAPI specification and generate high-quality client libraries in multiple programming languages.â
This is something I could really use! Is there a product that does this and doesnât cost an arm and a leg?
https://github.com/OpenAPITools/openapi-generator has 22K stars
Which this product seems to build off: https://github.com/konfig-dev/konfig/tree/main/generator
That's the official tool and has support for a lot of languages(probably the most). Granted last time I checked the generated python code wasn't great. Can't speak for other languages
Caveat that I work for Speakeasy, but there are a few tools you can look at:
- Speakeasy
- Fern
- Stainless
First SDK with Speakeasy is free and we also have discounts for companies who are just starting out.
Feel free to shoot me an email if we can be useful: nolan@spakeasy.com :)
Typo in your email btw
I'd like to say this was a clever ruse so that real people could reach me and bots wouldn't, but that'd be a lie. I just fat fingered it.
Isn't this entire thing what WSDL and SOAP was promising in the early 2000s?
And CORBA before it. And so forth.
I only remember converting WSDLs to Java.
And Ruby on Rails
That's what we do at Stainless. By curiosity, what languages are you looking for?
liblab.com
All others are too expensive at ~250$/language/month (still less expensive than human developer).
There's a huge number of them https://openapi.tools/#sdk
Including the semi official tools https://github.com/OpenAPITools/openapi-generator
Now if you want multi language generation and especially high quality you may have to spend a lot of time evaluating different choices. I decided that the official java client didn't generate very nice python code and went with https://github.com/openapi-generators/openapi-python-client even though it's a small personal project with a primary developer+random contributions from users. It just seemed nicer to use for python. Finding which generator to use especially for JavaScript seems difficult
Not every little idea, as useful as it might be, needs to turn into a hyper-growth business. Just make it an open source project on the side. If it gets popular then you get famous and hopefully some big company finds it so useful that they hire you and let you work on it full time. Konfig seems like a perfect example for this.
It takes a strong will to admit so publicly that you failed and to release unpolished code. Iâm sure many will benefit from your efforts. Bravo.
He is young. At that age, I tried multiple times and failed each time. I did manage to sell one and it earned me good money.
At that age you have plenty of time to pursue many things but you often lack the experience needed to succeed in the B2B market.
You definitely need support from someone with sufficient B2B experience, or you might have better luck focusing on something in the B2C space.
My only advice if he really wants to continue pursuing B2B is to find a partner who can sell the product. Selling is a full-time job on its own.
âItâs refreshing to see a founderâs honest postmortem that doesnât just blame âbad timingâ or âmarket conditions.â Instead, heâs ripping off the Band-Aid and laying bare the pain pointsâno hype, no quiet pivot into mediocrity. Itâs the kind of retrospective that should be required reading before your next âgrowth hackâ session: get the fundamentals right or prepare to pen your own âclosing up shopâ blog post.â
I remember Konfig. Sorry you couldn't find fit, but great work nonetheless.
About the code - would you be willing to add an MIT License? I don't see the code being used without a permissive license.
There's a LICENSE file. MIT in particular.
https://github.com/konfig-dev/konfig/blob/main/LICENSE
Well done having a go. Most don't.
Publishing your results makes you part of history. Respect.
A failed startup is nothing to be embarrassed about, most of us don't have the guts to try it!
You shouldn't expect much interest in the code, the value of a company's code without the business and people is quite negative when there isn't some technical secret sauce. Even if there was some technical wizardry people would just care about understanding how that one part worked and probably not use any of the code itself.
Konfig founder here, 100% agree. I wouldn't recommend anybody to actually try to decipher/deploy Konfig for their own use. I will say that one of our customers was able to deploy our docs platform for themselves while they find a way to deal with the blowout of Konfig shutting down.
>I wouldn't recommend anybody to actually try to decipher/deploy Konfig for their own use.
This is interesting. I used to work for a mortgage start-up years ago. They built several products for banks and home builders, such as a mortgage vault and tools for signing mortgage documents online.
One condition I still remember was that bank customers required us to put our code in escrow, held by lawyers, in case the company went under. I always wondered if customers could rebuild the code, allocate more resources to develop and maintain it, or simply look for an alternative solution.
they came to us for our solution. I assumed they either couldnât build it themselves or didnât want to invest in a custom solution.
i have been involved in quite a few code escrow agreements but none that were actually used. i'd be curious to hear any stories about cases where that did happen.
in my experience it has just been a way to help business decision makers credibly claim they are managing risk when buying from a startup
I imagine that it is for either insurance or regulatory reasons. Someone upstream is nervous about the bank relying on a startup for its core infrastructure, and is only placated by knowing that the code is in escrow. They're not themselves programmers and don't know how useless the code would be without the institutional knowledge of the startup.
True, having had a few increasingly less unsuccessful startups, a thing I learned the hard way is that:
1) You should not build a tech startup unless you have either a business plan for getting revenue quickly or shit ton of investment. And you won't typically get investment unless you have at least some notion of where the business is going to be. I've made this mistake. Techies mostly don't understand the business side well enough for this to work.
2) Most companies aren't startups. They are just companies. With revenue. That pay the bills. A startup is a company without revenue that is living on borrowed time and money. Especially if that's your own money, you need a plan for this.
3) VC funded companies mostly fail. A VC's business is to ensure that those companies that are going to fail, fail quickly. They fund their VC business with the handful of companies that don't fail and succeed spectacularly. So, getting "accelerated" or "funded" doesn't mean that you are on a path to success. It actually means you are on the spot to beat the odds and that you don't have a lot of time left. Chances are that you will fail quickly.
4) If you are a successful company with revenue, you don't need VCs. So you should question why you are talking to them at all? Are you struggling to make revenue? A VC won't fix that.
5) A lot of VCs are lazy and don't get interested until you are already successful. There is a weird dynamic here where companies get funded early and then fail. Or don't get funded and then succeed.
My current company is four years into being completely bootstrapped. As in we struggle with revenue and we put in our time when able. I mostly live off consultancy that I do on the side. The company just had its third most successful year in a row and is getting close to where I should be able to retire as a consultant soonish and focus on the business instead. But it's been a long journey.
As for open source. I open source anything that is not business specific or part of our core IP. One good reason for this is that I hate rebuilding the same crap when I start my next company. I've been through this and that kind of stuff just slows you down. People obsess about intellectual property in startups. The reality is that most software is not that valuable. But you still need to spend time, money, and energy building it.
So, I contribute a lot of tools, frameworks and what not of which I am the main user. Just so I can continue to use that stuff on the next project.
from the bottom of my heart thank you @dylanhuang . Releasing it without modification gives us rare opportunity to inspect the codebase of actual startup that had paid customers. Its more valuable than polished/redacted versions.
Has there ever been a scenario where someone gave up on a startup, dumped the code, then someone picked it up and turned it into a successful business?
This isn't exactly what you mentioned, but Josh Pigford gave up on his startup Maybe, shut down the company and open sourced it. It got incredibly popular on Github, so he started it up again. (https://maybefinance.com/)
A bigger example might be Mozilla. It was a closed-source browser (Netscape Navigator), and when it was dumped, some employees petitioned to open source it. And that's how we got Firefox.
Close but not quite (and keeping some parts intentionally vague):
There was a data startup ran for ~3y until the 10 person team imploded in a tough market. Everyone left or was laid off, the office was closed, operations ceded etc. The website and some collection were still left running in zombie mode.
A couple of years later, the non-technical founder and CEO (who at this point had bought everyone else out) saw demand and PMF emerging. Mostly through serendipity, I was one of 3 people brought in to "see what we can do with it", originally intended as a 3 month project. We came in with zero context and jumped right in to figuring out the ship we were now sailing. I was able to have one or two of conversation with the previous CTO but that was about it in terms of overlap.
Things progressed and within a few months we found ourselves as co-founders of "Company v2.0". My partner took over as CEO.
I left after 2y around our series A when we were 20~30 employees and arguably a leader in our market segment. At that point there were significant and crucial parts of the stack and codebase inherited (and evolved obv) from the original efforts by the previous team. The company is now an established brand, have offices in several countries and had a successful series B last year.
There are some legal risks with this. Having an OSS license from the copyright holder to use the code is not the same as being the copyright holder.
"I Failed".
YOU didn't fail. Your business failed. It's an important distinction.
You are not your business - for your mental health.
That catchy title is what brought it to the HN front page though.
Awesome, will be learning a lot from this. I feel this is much of an operational playbook as one could get.
A product in search of a problemâŚ
Remarkable show of persistence. Honestly, I really like that the Repo is as-is. Congratulations on the journey, hope you learnt a ton. PS - you built some of your static content on Docusaurus, a Meta open source project. They're hiring like crazy. Maybe you get to work on that one.
yeah, "software developers" is notoriously one of the toughest markets