I learned a new term today: micro ISV. Actually, I lie: I learned two new terms: ISV and microISV. I learned those new words and, most important, new IDEAS, by having as starting point Joel Spolsky’s today post Foreword to “Eric Sink on the Business of Software” .
In the post, besides introducing us to Eric Sink and to his articles on micro ISVs, Joel also writes about his first business EVER.

So, what did I do with the money? Nothing. The chairman of the linguistics department took it all. He decided that the money should be used to hold a really big party for all the institute staff. I wasn’t allowed to come to the party because I was too young.

The story is great by itself, I guess we all had a “first business” that failed miserably or got destroyed by some larger authority.

I had my first “entrepreneurial” ventures when in primary school, in the most Tom Sawyer-esque style. Trades of toys versus chewing gums, of comic books versus hand-drawn comics posters, or even my first productive “business”: producing and selling darts out of plastic body, paper tail and a needle in the front. Needless to say that I had to give the toys back  to the outraged parents AFTER the client had eaten his chewing gum, that my lack of drawing talent made the whole poster drawing business a failure, or that the needle darts business got me in front of the school’s principal on the edge of expusion.

Coming back from the memory lane, all I wanted to say was that almost every kid has a seed of entrepreneur inside. Too bad grownups or older kids almost never let them grow that seed…

What about microISV’s?  Well… it’s quite a lot to talk about, and you should just go ahead and read the posts on Eric Sink’s blog and some fascinating discussion threads on business and software over on Joel’s forums. There’s some really good suff in there… :-)

Again via Rodrigo I got to the kelblog page of the former author of Kelkoo(sold to Yahoo for quite a bit of cash) and founder of Wikio, which seems to be a cross of Digg, Newsvine and Kelkoo. I’m not sure yet, it’s in beta.

Well… the guy over at Kelblog pointed Rodrigo to a pretty nice idea: a map of Web 2.0 european startups. A great initiative, think of it as free PR :D
So.. if you match the criteria(startup, web2.0, Europe), go ahead and fill your data. It can’t hurt, can it?

Not very long ago I was studying the possibilities of starting a T-shirt printing company:

As I recall, there were some suppliers of specialized hardware around, in price ranges of 2000-10000$, depending of the quantities and print quality(just google for t-shirt printer), the price of a simple t-shirt stays below 5$ while the price for a printed one goes to around 15$ or even 35$ (just ask Hugh how he manages it.. :D ).

The most annoying part of the process? Packing and shipping…
I should have pondered more about the subject, since apparently it may be quite a productive business. Or so says Rodrigo about LaFraise.com company, a 3-person t-shirt printing business that just reached a 100kEuros/month revenue, in a slow but steady progress.

This kind of successes makes you think a lot harder about business opportunities…

This post was ment to be full of links to a couple of interesting posts that appeared lately on the blogosphere on naming a new-born startup. After a bit of thought I decided to extend it a bit with the following fragment:

Two years ago, while in an internship in an R&D+consulting IT firm in the suburbs of Paris, I was eagerly messenging a couple of college friends home, on the subject of starting our own company. I’ll tell you more about this adventure on some other occasion, but for now I’ll stick with the naming game.

Our chats became email-based, somewhere on a private Yahoo Group. I wish I had read at that time some of the posts I’ll link below. I didn’t, neither did my friends. We passed through a lot of variants, ranging from names like Exclusix, Xoatl, KSoft, QSoft,DSoft, MSoft… (see a pattern here? :D), Future Soft, Random Soft, No Soft and many more.

In the end we stuck with 5 variants on the name K2 and various suffixes like Soft, IT, Consulting, etc; me made a poll and, the six of us, voted for it. In my opinion the best name didn’t win. It wasn’t even in the poll list.

Although I had no idea what this name should have been, I learnt a lesson: never let a “focus group” vote for important issues such as branding ideas. Actually, if the group has more than 2 founders, don’t try to get a name based on voting. I’d suggest putting in a hat all the suggestions, then random picking half of them, throwing out the most hated one; repeat until you get a single name standing. People make better decisions when chosing what they DON’T like instead of what they do.

Our biggest mistake was that we didn’t Google it. We would have found the name extremely popular, thus making the “stand from the crowd” part very difficult. You should always Google a name. See Seth Godin’s post about this (linked below)

So… now let’s get to the long-awaited links:

• Guy Kawasaki had a post in february with tips on naming a company ; I’ll name a few of them: Begin with letters early in the alphabet; Embody verb potential; Embody logic;
• Dennis Forbes is a blogger who took the time to parse the 3.5 GB database of about 50 millions .com domains; his findigs? interesting… : all 3-letters/digits domain name combinations have been taken; most common nouns or names have been taken, combinations of two-three are still to be found. And many more, over here…
• again, Guy found an interesting blog of a company dedicated to naming companies and brands. A cool ressource of links and tips on chosing a good startup name.
• Probably the hottest entrepeneurs of the moment, the guys from 37signals (a catchy name with a meaning), have been writing, starting back in 1999, a manifesto of their phylosophy on webdesign, usability and business in general; a recommended read. Snippets of genius: the spoof eNormicon website on branding and company identity, and the Size does matter page.
• also refered by Kawasaki’s post mentioned above, a nice history of big companies names

Update:

• a bit older(5 months in the blogosphere is a HUUGE amount of time) but still incredibly interesting is Seth Godin’s post on The new rules of naming . Probably the best tip? Find a name that came up with close to zero Google matches.

My two cents, tips and tricks:

• one can notice companies that are big today MADE their name mean something instead of chosing a meaningful name from the start. Don’t get stuck in keywords.
• in case you didn’t know it, most domain name registrars give you the possibility of automatically generationg combinations of words entered. For instance nameboy(no affiliation here; I actually would advise you to use some external tool for this- Paul Graham named his company with a program)
• if ever in doubt, there’s plenty of name generators online. I wouldn’t suggest to use them blindly. Not even the Web2.0 generator.
• don’t pick a “too official name”: you don’t want to become the “corporate” type even before you become a startup. Who would have thought that Firefox, Redhat or, hell, even Apple would become such powerful brands, while companies named Intergalactic Digital Research or with bland names ending in Consulting, Solutions, Import Export or Consolidated were doomed to oblivion?

• Paul Graham has, on his blog, a couple of very interesting thoughts on this subject, most of them matching the ones I wrote above. Anyone interested in this subject  should give its mini-essay a look.

One of my old highschool-mates decided, a year after graduating from college and trying ordinary development jobs, to go ahead and try to make it on his own. His goal? To build the computer game that would make him rich.

I wish Catalin all the luck in the world. I want the best for him, and I hope one can still get rich by making and selling PC games. Still, I can’t help but feel worried about this kind of attempt. It’s not the freelancing, make-it-on-your-own part that scares me, but the game development one.

With all the free games nowadays (online games, freeware or open-source ones), it seems to me that people would only want to pay for games that are:

• amazing (think latest 3D Graphics cards, shootemups, etc…)
• in short supply - on not-so-crowded gaming platforms(games on mobiles, handhelds, consoles…)
• extremely innovative (think Katamari Damacy, etc…)
• provide lots of socializing - MMORPG

… and, even then, a game must really stand out from the crowd to be able to make ends meet.

All of this came to me today when reading a post on the OK/Cancel blog promoting a game launched by the author’s little brother and his friends; on the game’s website they say something like

after months and months of polish and iteration, we’re proud to say Eets is ready for the big time!

So… months and months of work for a game that, while pretty interestng-looking… does not seem likely to become a huge hit: a platform with flashy 2D graphics.

They sell it with about 20$. I know I wouldn’t pay for a 2D PC arcade game. Or maybe I’d pay, but not 20$, a lot less, and only if there was something special about it(i.e. addictiveness).

So… let’s make some small maths.

Any commercial game needs a bit of work, of at least 4-5 months for the simple(2D ones) to 3-4 years for complex 3D games, varying greatly with the developper’s expertise.

The size of the team? 2 persons, minimum, for the simpler ones (one core programmer and one graphics designer/game designer) to teams of 20-40 for the more complex ones (hundreds of programmers+designers for the ultra hit games…).

To break even, a very simple commercial game would need to bring revenue in the range of

((NbPersons*AverageSalary)+(FixCosts))*(NbDevelopmentMonths +NbMonthsToSell)

which, for a small 2 person garage startup with no fix costs, an average wage of 2000$, 4 development months and no extra months for shipping, packaging etc… would get around 16000 $
Let me repeat: a simple game made by 2 persons with minimum expenses during around 4 months would have to sell for 20$ a piece in 800 copies.

3 persons? Extra expenses? A couple of months to wait until cash starts to come in? Try multiplying the costs with 3.

Still, it doesn’t seem too much: You only have to find about 2000 people willing to pay 20$ for a simple game.

I know I’m not one of them. What about you?
How much would YOU pay for a game?

PS. this simple line of thought applies for ANY commercial software. Multiply the average wage by the number of months for the complete project (including planning, testing, shipping, maintenance, etc…) by the number of people involved and add in the extra costs(rent, light, phone, internet, computers…). Divide by the product’s price and you get the amount of buyers needed just to break even. For software in the range of 20-30$ a piece this number gets quickly at over 2000 people. Do you have a shot or not?

Caterina, one of Flickr’s founders, has an insightful post on “it’s a bad time to start a company”. It is a definite worth-reading, along with the comments. One interesting thing I learned: I had no idea Flickr was struggling for survival before being bought; I actually believed they were booming, that the AdSense and the Pro accounts gave them A lot of cash. Seems I was wrong…

So, on one hand we have the over-optimistic posts of angels or VC’s saying “hey, it’s sooo easy to build a company today, all you need is broadband, two computers, a co-founder, rent, and enough Ramen Noodles to keep you alive. Should you succeed you’ll be a millionaire, and if not… you’ll just have lost some weight ;)” . See for instance Rick Segal’s posts on VC2.0 and, most importantly, Paul Graham’s “essays“. Quite the thing to get you excited, isn’t it?

You don’t really want to get me started on Web2.0, do you ?

Caterina is right: everybody got excited. Everybody excited means A LOT of startups. Especially when talking about Web2.0, since the costs are ridiculous: a company just launching its website could manage with 100$/year in webhosting, 3 to 9$/year in domain name, some public-domain graphics, and enough Ruby on Rails as they can handle. And… voilà , your own Flickr, delicious or Reddit.

After Flickr reinvented photo-sharing and delicious reinvented bookmark-sharing, A LOT of Web2.0 startups appeared over-night with Video Sharing, Podcast/Vcast sharing, notes sharing. After Slashdot, there were Digg and Reddit, and after those A LOT of other “collaborative filtering” websites. After YouSendIt, there were DropSend and many other big-file-sharing. Something is fishy….

Caterina is right, even the best signal gets drowned in a sea of noise. Thousands of startups, with hundreds being launched every day.

As for me.. I only use about 5 Web2.0 websites(Gmail, Bloglines, Flickr, delicious and sometimes GoogleVideo). My friends and relatives use even less. Human mind can not deal with more than 7 signals at a time. Among all the thousands of startups or webpages launched lately, even the good ones will get overlooked. They will count themselves lucky to have a thousand of returning visitors. As for the paying customers… God help them…

What about other kind of IT startups, not Web2.0-related?

Web2.0 is easy: Php, Ruby, Rails, Ajax… they all sound weird but, on an entreprise-level scale, are gimmicks. Sure, you need to know programming and stuff, and you work hard to build your app. But the real added value is little, and gets smaller with every new startup in the field and with every new tutorial showing how to do a clone of Digg or del.icio.us in 10 minutes or less with one of the amazing Web2.0 frameworks available.
The problem is when you try to do value-added stuff (a word used in the software consulting world meaning the extra domain knowledge added by consultants, and the tunning of the software for the customer’s precise needs). While in the Web2.0-field every Internet-addict can read tutorials and references to get started on a “revolutionary” startup, in any other field tutorials are scarce and most things can’t be learned in 1h lessons. Hey, you might even need to go to college to learn Maths and Finance, Physics or Electronics. Sometimes you might need to have a Phd to really come with added value for a given field…(think Google’s Phd’s in Algorithmics and you’ll see what I mean).
So? Is there a solution? Web2.0 businesses are simple to start, but there is so much competition that chances to be remarcable for customers are close to null. IT-startups in non-IT fields need a lot of specific-field knowledge, and their targets are usually very narrow niches.

I have no idea on the solutions; probably you’ll get lucky and become the new Digg or even the new Google. Or maybe you’ll just have to broaden your knowledge and try to tackle some exotic niches as well. Who knows, maybe the jackpot is hidden somewhere along the long tail….

Update

Radu pointed me to a great post by Jason Calacanis on the same topic. Pretty much the same ideas, only in a smarter and more informed way than me. I can only agree with him: alghough I won’t like it, I can hardly wait for the winter to come: winter being the time when people will get sick of all these free but unstable web apps, and only the best ideas will survive.

The perfect time to launch a startup is in the winter; SixApart did it, Flickr did it, Weblogs. Inc did it, Google kind of did it. If you survive the winter, then in the summer you can be big.

Via Dave Winer I get to Fred Wilson’s favorite business model:

Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.

… This business model has been around for a long time.  Shareware always used a model like this and there are many successful software companies that have been built with this model.

Pretty interesting thoughts, definitely a post worth reading. Mainly in combination with Russell Beattie’s Wtf2.0  which I linked to earlier here.

I read several interesting things today, and I might as well link to them since they somehow tackle the web2.0, entrepreneurship, marketing and ideas :D

• Russel Beatie talks about Apple iPod Shuffle making a pretty good point:

“…if you’re going to launch a new product… the product doesn’t need to be innovative … you need to make sure you have a reason why it’s special anyways… Obviously it can’t be too mundane … but, it doesn’t need to be the most innovative thing on Earth either… “Soft launching” is for pussies. If you want to launch a new product… sell the damn thing. SELL it! Push it, promote it, pound it, make it special. I don’t buy a product because I like your company, I buy because I like ME and I want something special for ME.”

• The second link was pointed by the guys from 37signals and it’s about Contrasting Ideas About Web Application Design ; in other words the fact that one can notice two trends of rich web apps design: the first tries to mimic desktop apps as much as possible, while the other still provides some functionality, but keeps the distinction alive: web pages are web pages, they should be simple and fast, desktop-alikeness be damned.

My 2 cents on this one?

Web apps with classic design have proven their point : big successful websites are(still) webpages-like: functionality prevails against design. Besides, a new meme keeps spreading, concerning “unbeautiful” design, the hand-made one that says : we only care about people, and we know you are too smart to be fooled by eye candy(read about it here and here).

It may be just me, but I prefer simplicity, fast loading pages and as few clicks as possible to the eye candy. Desktop-alikeness looks great providing it keeps the web-app intuitive and responding. Otherwise… it ain’t worth it ;-)

And,(completely) out of topic, I just discovered that Yahoo Domains no longer sell domains for 3$/year. May be a good thing(since I guess domain squatters have been really enjoying the offer) or a bad news(I discovered it while trying to buy some 3 new domain names). All in all, the price tag of 10$/year looks ok, it forces one to think a bit more about what he really needs the domain for :D

The link of the day is about a talk from the Flickr guys on Scaling Fast and Cheap - How We Built Flickr over at ETech 2006, whose outline you can find over at Vogon Poetry
Pretty useful stuff, in the same line of thought as in About Bootstraping :

• use Linux, MySQL
• keep it simple
• Control Version everything
• use bugtacking software
• scalability implies more servers, not more powerful ones(horizontal scaling)

Some of the most unusual business ideas, proof that imagination, enthusiasm and hard work are most usually a recipe of success.

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