I have a startup idea, how should I procede?
March 26, 2020 11:50 AM Subscribe
I was working on a large, high volume project. It was originally to be built with an off the shelf e-commerce platform that like all "turn-key" systems break down in certain areas pretty hard. I ended up rewriting the backend. At the time the only companies I knew that used a similar architecture were large tech companies, but the idea wasn't new ... however, everything was built in house. Since my own custom built solution worked really, really well and I decided maybe for the first time I had a potential product on my hand.
First, since I finished about 9 months ago there have been some big heavily funded companies that try to make this turn key in the sense your need developers and an IT department who know how to use it. It is not marketed towards business leaders that would tout scalability, ability to increase revenue, and quickly add new features, etc. Without giving too much away it works but there's a lot to be done to take a custom built product and polish it with dashboards, QA, marketing, sales, etc.
Feel free to be mean (several VC friends have been), but I've come up with a 40 page prospectus with revenue projections and kept it as business as possible. The fact other companies have popped up and are very well funded tells me I'm onto something but I don't know what I'm doing. First thing on my background:
1. I traditionally consult so build custom software or custom software on "turn-key" products. So I have not worked at a startup but have worked with large companies and am comfortable working with c-level and similar executives.
2. The friend who advised me said I needed companies and existing revenue, what I was assuming would that a VC would take all my equity and do that work for me (exaggeration, but I didn't realize it was we don't want to acquire you when you're making $25 million at 20% growth a year, which might be bad information).
3. I'm not looking to get rich off this, or turn this into the next Facebook but business owners I talked to, unfortunately all retired, think the area is great for growth ... but none were in tech and received funding for their business from friends and family. Based on calculations I'd probably need $250k first year (not including my salary) to create a decent UI, and shore up the programming to make an MVP. I have no problems giving up equity for salary but all my developer friends are senior with kids and already bogged down with 60 hour jobs. Also not the best economy to take a leap.
4. Sales would be the biggest hurdle as the competitors again are completely targeting IT driven companies so for example having a simple way to run the application without needing K8s or minikube is a great sell without having to develop it in house, I don't think I'd compete well in that area (or I'd be competing with huge, well funded companies).
In any case despite doubts, I have a chicken and egg problem of needing something a product making money before someone cares while also needing money. I'm guessing this is a common problem but don't have a mentor or someone to tell me if this is not possible and the world is littered with good ideas that didn't make it.
Sorry if I was vague on purpose on some things. The economy and me having to temporarily move to a non-tech city has been very limiting in my social network. I've spent quite a bit of time creating crazy spreadsheets projecting revenue/expenses and doing all the things a prospectus (right word?) and it almost has made the actual product gone by the wayside. Do I need to sort of look for an "all-in" partner to ease the burden, as of right now this is a full time job with no income but a lot of interest.
To be fair the few VCs I contacted were actually very interested and impressed and wanted me to come back when I was making money. I'm not hung up on "VC" but as someone who hasn't done product work angel investor or something may be better, I'm just at a loss at this point.
So any advice, even if it is, "most people just get lucky and know the right people," would help at this point.
First, since I finished about 9 months ago there have been some big heavily funded companies that try to make this turn key in the sense your need developers and an IT department who know how to use it. It is not marketed towards business leaders that would tout scalability, ability to increase revenue, and quickly add new features, etc. Without giving too much away it works but there's a lot to be done to take a custom built product and polish it with dashboards, QA, marketing, sales, etc.
Feel free to be mean (several VC friends have been), but I've come up with a 40 page prospectus with revenue projections and kept it as business as possible. The fact other companies have popped up and are very well funded tells me I'm onto something but I don't know what I'm doing. First thing on my background:
1. I traditionally consult so build custom software or custom software on "turn-key" products. So I have not worked at a startup but have worked with large companies and am comfortable working with c-level and similar executives.
2. The friend who advised me said I needed companies and existing revenue, what I was assuming would that a VC would take all my equity and do that work for me (exaggeration, but I didn't realize it was we don't want to acquire you when you're making $25 million at 20% growth a year, which might be bad information).
3. I'm not looking to get rich off this, or turn this into the next Facebook but business owners I talked to, unfortunately all retired, think the area is great for growth ... but none were in tech and received funding for their business from friends and family. Based on calculations I'd probably need $250k first year (not including my salary) to create a decent UI, and shore up the programming to make an MVP. I have no problems giving up equity for salary but all my developer friends are senior with kids and already bogged down with 60 hour jobs. Also not the best economy to take a leap.
4. Sales would be the biggest hurdle as the competitors again are completely targeting IT driven companies so for example having a simple way to run the application without needing K8s or minikube is a great sell without having to develop it in house, I don't think I'd compete well in that area (or I'd be competing with huge, well funded companies).
In any case despite doubts, I have a chicken and egg problem of needing something a product making money before someone cares while also needing money. I'm guessing this is a common problem but don't have a mentor or someone to tell me if this is not possible and the world is littered with good ideas that didn't make it.
Sorry if I was vague on purpose on some things. The economy and me having to temporarily move to a non-tech city has been very limiting in my social network. I've spent quite a bit of time creating crazy spreadsheets projecting revenue/expenses and doing all the things a prospectus (right word?) and it almost has made the actual product gone by the wayside. Do I need to sort of look for an "all-in" partner to ease the burden, as of right now this is a full time job with no income but a lot of interest.
To be fair the few VCs I contacted were actually very interested and impressed and wanted me to come back when I was making money. I'm not hung up on "VC" but as someone who hasn't done product work angel investor or something may be better, I'm just at a loss at this point.
So any advice, even if it is, "most people just get lucky and know the right people," would help at this point.
Response by poster: If not, beat the shoe leather and go downtown to small businesses and get some clients.
Yeah this is not aimed at small businesses but companies that would have say, 1 million plus SKU product catalogs. So I have no idea how vendors get into big clients like that without already being well-known vendors. Only time I've seen small vendors were creative/design teams. Especially for mission critical software. Small businesses could use it, but being down for 15 minutes or being able to do deploys with automatic rollbacks based on error rates are not something a local bookstore would utilize.
posted by geoff. at 12:41 PM on March 26, 2020
Yeah this is not aimed at small businesses but companies that would have say, 1 million plus SKU product catalogs. So I have no idea how vendors get into big clients like that without already being well-known vendors. Only time I've seen small vendors were creative/design teams. Especially for mission critical software. Small businesses could use it, but being down for 15 minutes or being able to do deploys with automatic rollbacks based on error rates are not something a local bookstore would utilize.
posted by geoff. at 12:41 PM on March 26, 2020
> Yeah this is not aimed at small businesses but companies that would have say, 1 million plus SKU product catalogs. So I have no idea how vendors get into big clients like that without already being well-known vendors.
As a consultant, you hopefully already have a rolodex of people working at companies with 1 million plus SKU catalogs. Your first order of business should be reaching out to them and figuring out who would authorize the purchases you have in mind, and what their requirements and costs are.
Also, I don't know the market that well, where does 1M+ land on the business scale? AFAICT, even Apple only has 26k SKUs. Are you looking for companies that have 1M SKUs but a paper process to manage it?
> In any case despite doubts, I have a chicken and egg problem of needing something a product making money before someone cares while also needing money. I'm guessing this is a common problem but don't have a mentor or someone to tell me if this is not possible and the world is littered with good ideas that didn't make it.
This is pretty much a universal problem. The bootstrapping approach involves slowing your time to market down, getting revenue ASAP, and funding hires from revenue growth alone. Which again means the first step is finding your first customer. Any spreadsheet model you build is going to be wrong, and only made less wrong with data. Go get the data on your customers. If that means telling them your idea, then do so. You can't keep your product so secret nobody knows they should buy it.
posted by pwnguin at 12:59 PM on March 26, 2020
As a consultant, you hopefully already have a rolodex of people working at companies with 1 million plus SKU catalogs. Your first order of business should be reaching out to them and figuring out who would authorize the purchases you have in mind, and what their requirements and costs are.
Also, I don't know the market that well, where does 1M+ land on the business scale? AFAICT, even Apple only has 26k SKUs. Are you looking for companies that have 1M SKUs but a paper process to manage it?
> In any case despite doubts, I have a chicken and egg problem of needing something a product making money before someone cares while also needing money. I'm guessing this is a common problem but don't have a mentor or someone to tell me if this is not possible and the world is littered with good ideas that didn't make it.
This is pretty much a universal problem. The bootstrapping approach involves slowing your time to market down, getting revenue ASAP, and funding hires from revenue growth alone. Which again means the first step is finding your first customer. Any spreadsheet model you build is going to be wrong, and only made less wrong with data. Go get the data on your customers. If that means telling them your idea, then do so. You can't keep your product so secret nobody knows they should buy it.
posted by pwnguin at 12:59 PM on March 26, 2020
Response by poster: AFAICT, even Apple only has 26k SKUs. Are you looking for companies that have 1M SKUs but a paper process to manage it?
Depends on how you define SKUs and product bundling, global products across global markets. So parent-child SKUs but in any case there's a lot.
Obviously I have good contacts with non-competes and even buying that out a lot of vendors want expensive liability insurance or revenue guarantees for mission critical processes.
Really best would be a buy out from a larger company, I'm not looking to run the world here, just found something innovative.
Edit: Product variants in the last firm I worked at were different SKUs too so without giving too much away 25 product variants for one essential product really increases it and bundled into things obviously increases it. This was a very, very large global company where products were at a much smaller price point then Apple.
posted by geoff. at 1:35 PM on March 26, 2020
Depends on how you define SKUs and product bundling, global products across global markets. So parent-child SKUs but in any case there's a lot.
Obviously I have good contacts with non-competes and even buying that out a lot of vendors want expensive liability insurance or revenue guarantees for mission critical processes.
Really best would be a buy out from a larger company, I'm not looking to run the world here, just found something innovative.
Edit: Product variants in the last firm I worked at were different SKUs too so without giving too much away 25 product variants for one essential product really increases it and bundled into things obviously increases it. This was a very, very large global company where products were at a much smaller price point then Apple.
posted by geoff. at 1:35 PM on March 26, 2020
Are you sure you own this IP?
posted by praemunire at 2:54 PM on March 26, 2020 [1 favorite]
posted by praemunire at 2:54 PM on March 26, 2020 [1 favorite]
do deploys with automatic rollbacks based on error rates are not something a local bookstore would utilize.
There are companies that would accept that? That's crazy. Prod rollbacks of mission critical software is something people get fired/demoted for, and it wouldn't be useful in a testing environment.
posted by The_Vegetables at 2:55 PM on March 26, 2020
There are companies that would accept that? That's crazy. Prod rollbacks of mission critical software is something people get fired/demoted for, and it wouldn't be useful in a testing environment.
posted by The_Vegetables at 2:55 PM on March 26, 2020
Response by poster: Are you sure you own this IP?
Checked with two very well established law firms. Yes.
posted by geoff. at 3:05 PM on March 26, 2020
Checked with two very well established law firms. Yes.
posted by geoff. at 3:05 PM on March 26, 2020
Response by poster: There are companies that would accept that? That's crazy. Prod rollbacks of mission critical software is something people get fired/demoted for, and it wouldn't be useful in a testing environment.
The problem is the difference in prod and dev in complex environments. Kubernetes can be setup to deploy to a small set of "pods" or whatever the term is and if the error rate is above whatever is defined it'll rollback. Using event streams like Kafka will reroute this on error so there would be very low latency errors to the end user. I'm exaggerating a bit to keep things simple but I have yet to see any bad transactions in 11 months of deployment.
Edit: Feel free to DM me for more details.
posted by geoff. at 3:11 PM on March 26, 2020
The problem is the difference in prod and dev in complex environments. Kubernetes can be setup to deploy to a small set of "pods" or whatever the term is and if the error rate is above whatever is defined it'll rollback. Using event streams like Kafka will reroute this on error so there would be very low latency errors to the end user. I'm exaggerating a bit to keep things simple but I have yet to see any bad transactions in 11 months of deployment.
Edit: Feel free to DM me for more details.
posted by geoff. at 3:11 PM on March 26, 2020
There are companies that would accept that? That's crazy.
Lots of companies that I guarantee are household names in your own house operate this way. It's not that crazy.
Anyway, I suggest setting this up as a SaaS solution and onboarding a client or two to see if there is market fit. You'll have a lot more success getting VCs to pay attention if people are already giving you money for it. And if you get a few customers and tap out the market, well, at least you have a lifestyle business putting a few bucks in your pocket every month.
The biggest hurdle you'll run into getting individual customers is that anyone large enough to build what I think you're getting at (some sort of store/CRM built on K8s + Kafka) is going to have this expertise in house already. No one (well, no one that isn't insane) tries to roll out a Kubernetes solution without having the type of technical infrastructure that got them to the point where K8s is actually useful.
posted by sideshow at 4:40 PM on March 26, 2020 [1 favorite]
Lots of companies that I guarantee are household names in your own house operate this way. It's not that crazy.
Anyway, I suggest setting this up as a SaaS solution and onboarding a client or two to see if there is market fit. You'll have a lot more success getting VCs to pay attention if people are already giving you money for it. And if you get a few customers and tap out the market, well, at least you have a lifestyle business putting a few bucks in your pocket every month.
The biggest hurdle you'll run into getting individual customers is that anyone large enough to build what I think you're getting at (some sort of store/CRM built on K8s + Kafka) is going to have this expertise in house already. No one (well, no one that isn't insane) tries to roll out a Kubernetes solution without having the type of technical infrastructure that got them to the point where K8s is actually useful.
posted by sideshow at 4:40 PM on March 26, 2020 [1 favorite]
You mention that you aren't in a tech city but there might be an organization there that can help you. In Canada there's an organization called the Canadian Digital Media Network which connects "regional innovation hubs" - generally speaking these are NFP or NGO or similar sorts of organizations that can connect you to mentors with experience commercializing IP. The CDMN also maintains good relationships with organizations with similar goals around the world so they be able to make a recommendation.
(Disclaimer: I've worked closely with CDMN in the past, though nothing directly for over five years now)
posted by cCranium at 6:46 AM on March 27, 2020
(Disclaimer: I've worked closely with CDMN in the past, though nothing directly for over five years now)
posted by cCranium at 6:46 AM on March 27, 2020
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Listen to what the ones you have talked to are telling you - get some clients and show some sales and profits. If that means you have to hire a sales guy, then that's what it means. If not, beat the shoe leather and go downtown to small businesses and get some clients.
posted by The_Vegetables at 12:18 PM on March 26, 2020