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> If your startup ends up making you a million dollars a year you will probably be very happy and rightfully call yourself a success. I see this a lot from var

by pmarca 14y ago

> If your startup ends up making you a million dollars a year you will probably be very happy and rightfully call yourself a success. I see this a lot from various corners of the startup ecosystem, particularly 37 Signals and their followers. The problem is that it's not really true, by which I mean there are not very many examples of it begin true, and there is an excellent reason to believe that it may never be true. Which is: you need to find a market big enough to support "lifestyle income" (or your million dollars a year) but not big enough that a startup or growth technology company that is really good at doing things at scale isn't just going to eat it, and kill you in the process. One of the reasons Jason Fried needs to yell so loudly about 37 Signals being the model for lots of other companies is because it's really not -- it's really rare to find a lifestyle technology business.

dbul 14y ago
One of the reasons Jason Fried needs to yell so loudly... Another reason: marketing. People don't get that.
patio11 14y ago
it's really rare to find a lifestyle technology business. The traditional challenge you'd level here is "Name three" (37signals, Fog Creek, Balsamiq) but, due to the type of people I hang out with, I could get to fifty before having to slow down and start checking my Gmail. A friend of mine who is in the selling shovels business estimated that there are 30,000 firms selling SaaS. (That number struck me as crazy until I realized that, oh yeah, I'm routinely in rooms with several hundred of them at once.) The overwhelming majority will never raise outside capital.
- dirtyaura 14y ago
  Are those fifty making 1 million dollars a year (per founder) from products? I mean it's obvious that you can make a good living in tech by consulting, but I'm curious how many "lifestyle" product companies are out there that make profit in millions.
  - deleted 14y ago
    [deleted]
  - rmc 14y ago
    I don't think profit per year per founder is a good definition of "lifestyle business", a better definition would be "can you make money while you're sleeping/on holiday?". If you're a consultant, then you don't make money while on holiday. I don't even think you need €1,000,000 per annum to count as success, I'd set the bar at €100,000. I'd be quite happy to make that amount per year in my sleep.
    - dirtyaura 14y ago
      "a million dollars a year for you" was a limit given in mixmax's comment, and Marc also use that. So I'm just curious if Patrick was really meaning that he can without pausing name 50 non-VC backed lifestyle product companies that are making $1M in salaries and profits for their founders, or that he meant that he can name 50 companies that are generally well-off, and are making e.g. a few thousand dollars per year for their founders. The difference is important in my opinion, as I can name a several that make a few thousand dollars a year by consulting, but I don't know people that make over a million a year for themselves with an internet product without an investment. Those that I personally know that earn $1m, are in more fishy type of business (E.g. quick SMS loans) and have a sizeable financial backing from more traditional investors.
      - tptacek 14y ago
        Any multi-person consultancy in our industry can easily be doing $1MM. Most companies that build and ship product can easily consult, so, any of those companies that continue to ship product for multiple years should cause you to ask how much more than $1MM they must be making. "Salaries and profits" is an awfully weird metric, since salary is the #1 cost factor both for consultancies and product companies. Maybe you should just say "revenue". I respectfully suggest that your radar is off here. No, you don't need to be in "fishy types of businesses" to break $1MM.
        14y ago
lsc 14y ago
>it's really rare to find a lifestyle technology business. You... must live in a different world from me. I mean, I am a lifestyle "technology" business. Most of my customers are, too... a whole lot of them are so small that they still have dayjobs. For that matter, most of my suppliers are, too. But think of all the web design firms that exist. All of the small-business IT firms. The small consulting shops of various stripes. There are huge numbers of these "too small for important people to care" companies. and so many web applications are thrown together by one person, just messing around. Many, probably most of my suppliers and competitors are also small operations owned by one or two people. Linode, as far as I can tell, started a lot like I did; and so did most of my smaller competitors. (Slicehost is the counterexample; my understanding is that they started in a very startup-y manner.) I mean, obviously, you get fewer firms as you raise your revenue cutoff. If you require millions of dollars a year in revenue, nearly all my customers fall off the list... but actually, probably not that many of my suppliers. I mean, I'm buying one rack from coresite, 5g from cogent, and 1.1G and 2 racks from he.net, but that's less than half my monthly outlay, and other than that, all that money goes to small private companies (and really, he.net might be considered a small private company that grew to be a not-so-small private company.)
- patio11 14y ago
  Slicehost is the counterexample; my understanding is that they started in a very startup-y manner. Maxed out their credit cards, tried to find angel funding in St. Louis, and got told the going terms were "We'll get 50% of the company to cosign a loan for you" so they continued to bootstrap, managed to successfully structure a pricing model such that customers pre-paid for services (allowing them to service most of demand), rode on to acquisition by Rackspace... if I recall correctly. (Pours one out for Slicehost.)
  - lsc 14y ago
    hm. do you know where I can read more about them? or is this stuff you know personally? They did seem to grow... very quickly. My impression was that they grew much faster than linode or I. Of course, I have no numbers to back that up either way.
silverlake 14y ago
There's a huge world of $M businesses out there outside of the narrow Techcrunch-oriented ad-driven consumer internet biz. I did consulting for a while and met tons of small niche companies making millions for crappy software (and often crappy service). Long ago a guy at MSR told me they wrote up business ideas for Bill Gates' Think Weeks. He said it was easy to come up with lots of $100M ideas, but no one cared. MS needs $1-10B ideas to make it worth their while. The reason I'm not rich is because these niches are hard to break into. It's all about enterprise sales to obscure niches. In fact, we need a dating event to pair enterprise sales people and tech founders. I tried enterprise sales, but within a month I wanted to kill myself. It takes a special breed of human to do that.
ryanbrunner 14y ago
Isn't this article implying that it's awfully hard to find success in the VC model as well? With the traditional funding model, you're either an AirBnB, DropBox, or someone who ultimately isn't going to make much of a lot of money at all. If you're lucky, you'll come out of it with something that maybe makes up for the blood and sweat equity you put into the company for little or no pay. Ultimately, I'd agree that successfully getting a 37 signals, Balsamiq, or Fog Creek off the ground is difficult, but compared to the VC model of "DropBox or bust", it seems like a much more attainable goal. I think the main lesson is that there's really no free lunch in the startup world - we've all heard it a hundred times before, but there's no silver bullet that guarantees success, or even a decent chance at success in this business. It's not quite the lottery, but a 1 in 50 shot probably isn't unrealistic odds.

by pmarca 14y ago

dbul 14y ago

One of the reasons Jason Fried needs to yell so loudly... Another reason: marketing. People don't get that.

patio11 14y ago

it's really rare to find a lifestyle technology business. The traditional challenge you'd level here is "Name three" (37signals, Fog Creek, Balsamiq) but, due to the type of people I hang out with, I could get to fifty before having to slow down and start checking my Gmail. A friend of mine who is in the selling shovels business estimated that there are 30,000 firms selling SaaS. (That number struck me as crazy until I realized that, oh yeah, I'm routinely in rooms with several hundred of them at once.) The overwhelming majority will never raise outside capital.

dirtyaura 14y ago
Are those fifty making 1 million dollars a year (per founder) from products? I mean it's obvious that you can make a good living in tech by consulting, but I'm curious how many "lifestyle" product companies are out there that make profit in millions.
- deleted 14y ago
  [deleted]
- rmc 14y ago
  I don't think profit per year per founder is a good definition of "lifestyle business", a better definition would be "can you make money while you're sleeping/on holiday?". If you're a consultant, then you don't make money while on holiday. I don't even think you need €1,000,000 per annum to count as success, I'd set the bar at €100,000. I'd be quite happy to make that amount per year in my sleep.
  - dirtyaura 14y ago
    "a million dollars a year for you" was a limit given in mixmax's comment, and Marc also use that. So I'm just curious if Patrick was really meaning that he can without pausing name 50 non-VC backed lifestyle product companies that are making $1M in salaries and profits for their founders, or that he meant that he can name 50 companies that are generally well-off, and are making e.g. a few thousand dollars per year for their founders. The difference is important in my opinion, as I can name a several that make a few thousand dollars a year by consulting, but I don't know people that make over a million a year for themselves with an internet product without an investment. Those that I personally know that earn $1m, are in more fishy type of business (E.g. quick SMS loans) and have a sizeable financial backing from more traditional investors.
    - tptacek 14y ago
      Any multi-person consultancy in our industry can easily be doing $1MM. Most companies that build and ship product can easily consult, so, any of those companies that continue to ship product for multiple years should cause you to ask how much more than $1MM they must be making. "Salaries and profits" is an awfully weird metric, since salary is the #1 cost factor both for consultancies and product companies. Maybe you should just say "revenue". I respectfully suggest that your radar is off here. No, you don't need to be in "fishy types of businesses" to break $1MM.
      - 14y ago

lsc 14y ago

>it's really rare to find a lifestyle technology business. You... must live in a different world from me. I mean, I am a lifestyle "technology" business. Most of my customers are, too... a whole lot of them are so small that they still have dayjobs. For that matter, most of my suppliers are, too. But think of all the web design firms that exist. All of the small-business IT firms. The small consulting shops of various stripes. There are huge numbers of these "too small for important people to care" companies. and so many web applications are thrown together by one person, just messing around. Many, probably most of my suppliers and competitors are also small operations owned by one or two people. Linode, as far as I can tell, started a lot like I did; and so did most of my smaller competitors. (Slicehost is the counterexample; my understanding is that they started in a very startup-y manner.) I mean, obviously, you get fewer firms as you raise your revenue cutoff. If you require millions of dollars a year in revenue, nearly all my customers fall off the list... but actually, probably not that many of my suppliers. I mean, I'm buying one rack from coresite, 5g from cogent, and 1.1G and 2 racks from he.net, but that's less than half my monthly outlay, and other than that, all that money goes to small private companies (and really, he.net might be considered a small private company that grew to be a not-so-small private company.)

patio11 14y ago
Slicehost is the counterexample; my understanding is that they started in a very startup-y manner. Maxed out their credit cards, tried to find angel funding in St. Louis, and got told the going terms were "We'll get 50% of the company to cosign a loan for you" so they continued to bootstrap, managed to successfully structure a pricing model such that customers pre-paid for services (allowing them to service most of demand), rode on to acquisition by Rackspace... if I recall correctly. (Pours one out for Slicehost.)
- lsc 14y ago
  hm. do you know where I can read more about them? or is this stuff you know personally? They did seem to grow... very quickly. My impression was that they grew much faster than linode or I. Of course, I have no numbers to back that up either way.

silverlake 14y ago

There's a huge world of $M businesses out there outside of the narrow Techcrunch-oriented ad-driven consumer internet biz. I did consulting for a while and met tons of small niche companies making millions for crappy software (and often crappy service). Long ago a guy at MSR told me they wrote up business ideas for Bill Gates' Think Weeks. He said it was easy to come up with lots of $100M ideas, but no one cared. MS needs $1-10B ideas to make it worth their while. The reason I'm not rich is because these niches are hard to break into. It's all about enterprise sales to obscure niches. In fact, we need a dating event to pair enterprise sales people and tech founders. I tried enterprise sales, but within a month I wanted to kill myself. It takes a special breed of human to do that.

ryanbrunner 14y ago

Isn't this article implying that it's awfully hard to find success in the VC model as well? With the traditional funding model, you're either an AirBnB, DropBox, or someone who ultimately isn't going to make much of a lot of money at all. If you're lucky, you'll come out of it with something that maybe makes up for the blood and sweat equity you put into the company for little or no pay. Ultimately, I'd agree that successfully getting a 37 signals, Balsamiq, or Fog Creek off the ground is difficult, but compared to the VC model of "DropBox or bust", it seems like a much more attainable goal. I think the main lesson is that there's really no free lunch in the startup world - we've all heard it a hundred times before, but there's no silver bullet that guarantees success, or even a decent chance at success in this business. It's not quite the lottery, but a 1 in 50 shot probably isn't unrealistic odds.