3 ms·

When it comes to startups, products and services don't mix

7 points by icey 17y ago

jacquesm 17y ago
I'm a 'bit' investor (angel round) in a small startup that has been doing both, a product and a service. There is a really nice synergy between the two happening there. The product functions as the ice breaker, the services come after. It saves them a ton on marketing costs for their services division, basically the customers come to them, find out what a nice little company it is and then decide to trade 'up'. -- edit: In general I think this is bad advice, small startups that do only 'one thing' and are not willing to move where the money is tend to die out rather quickly. It often doesn't really matter what brings in the $ to stay afloat, as long as you are clear about where you want to be. If consulting or fixed price jobs are what keeps you in business long enough to get a solid product or if you use a product as the door opener to sell more services, as long as you don't let the interests in the one conflict with the other you should be in good shape. Much better shape than those that only have a product or only do contract work. Ideally you need three legs to stand on, so three products, preferably aimed at different markets, or a services division that you can use to pick up the slack. Just a single product or just contracting is asking for trouble, and contracting with only a single large customer to bring in more than 40% of your total income stream is really playing Russian roulette.
- aditya 17y ago
  I think you're wrong. Once you go down the path to doing consulting, you lose the hunger to build the product business because the money keeps coming in. pg says[1] that most product startups die when they become consulting businesses, and I think he's right. Do you have counter-examples of how a product startup became a consulting company and then went back to being a product startup? Not saying it isn't do-able, just that it's much harder. I'm in the spot now, and having an interesting time dealing with the challenges. EDIT: By wrong, I mean, I think you're right that you shouldn't let the consulting business interfere but in practice that is almost impossible to do. 1. http://www.paulgraham.com/startupfunding.html#f2n http://www.paulgraham.com/startupfunding.html#f2n
ruang 17y ago
37signals is an obvious counter-example.

7 points by icey 17y ago

I'm a 'bit' investor (angel round) in a small startup that has been doing both, a product and a service. There is a really nice synergy between the two happening there. The product functions as the ice breaker, the services come after. It saves them a ton on marketing costs for their services division, basically the customers come to them, find out what a nice little company it is and then decide to trade 'up'. -- edit: In general I think this is bad advice, small startups that do only 'one thing' and are not willing to move where the money is tend to die out rather quickly. It often doesn't really matter what brings in the $ to stay afloat, as long as you are clear about where you want to be. If consulting or fixed price jobs are what keeps you in business long enough to get a solid product or if you use a product as the door opener to sell more services, as long as you don't let the interests in the one conflict with the other you should be in good shape. Much better shape than those that only have a product or only do contract work. Ideally you need three legs to stand on, so three products, preferably aimed at different markets, or a services division that you can use to pick up the slack. Just a single product or just contracting is asking for trouble, and contracting with only a single large customer to bring in more than 40% of your total income stream is really playing Russian roulette.

aditya 17y ago
I think you're wrong. Once you go down the path to doing consulting, you lose the hunger to build the product business because the money keeps coming in. pg says[1] that most product startups die when they become consulting businesses, and I think he's right. Do you have counter-examples of how a product startup became a consulting company and then went back to being a product startup? Not saying it isn't do-able, just that it's much harder. I'm in the spot now, and having an interesting time dealing with the challenges. EDIT: By wrong, I mean, I think you're right that you shouldn't let the consulting business interfere but in practice that is almost impossible to do. 1. http://www.paulgraham.com/startupfunding.html#f2n http://www.paulgraham.com/startupfunding.html#f2n

ruang 17y ago

37signals is an obvious counter-example.