Archive for February, 2010

Find a niche. Don’t shoot for the moon.

A saw a retweet the other day that I think was originally from one of the top guys at Twitter. It was something about “not shooting for the moon, lest you end up a corpse floating through space” or something like that.

I think his point was that if you shoot for the moon, most of the time you will end up with nothing. There is some irony in this coming from someone at Twitter, but I think his point is valid.

This reminded me of a discussion I had a couple of weeks ago with a great group of guys in Portland, Oregon. One of the guys and I got into a discussion about whether or not one should aim, in business, to change the world. He thought ‘yes’ and I thought ‘no’.

If you want to change the world, start a religion or a political/economic system. Start the next Christianity or the next Capitalism. Follow the footsteps of Gandhi or Mother Teresa. Work to increase crop yields or basic sanitation. Or design really inexpensive water pumps that are powered by solar or human energy (that’s a real one, by the way, that’s really cool!)

We talked about great, hugely successful companies like Google, Apple, Microsoft, Amazon, Oracle, etc. Now, I don’t know this for sure, but I bet most of those companies did not start out to change the world. I bet they started out to fill a market need and to make money… or maybe to take over the world in at least some of those cases :-).

The whole conversation started because of something I find great: small businesses that fill niches across our economy. Through Chargify, I talk with people who run small businesses that you’ll never hear of, that start small with revenue of a few hundred or a few thousand dollars a month, that grow to cover the mortgage, then allow the person to cut back their consulting or job hours, and eventually provide a good living for their family and employees.

I met a guy who developed a simple web/email-based service for a decidedly non-tech niche that he enjoys. It generates $3K/month, which pays his mortgage. I won’t be surprised if I ask him in 6 or 12 months and he’s up to $4K or $6K or even $10K/month. But even if it stays around $3K/month, it’s still great, because it’s one of several things he’s doing and it’s already paying a large expense for his family.

I’ve seen other stories that start similarly, but if you leave and come back 5 years later, whoa, the business is generating $25K or $50K or $100K a month, employing people, providing a good living and maybe building savings.

I love these stories because I think of them as the real economy, the online and offline backbone that generates a large chunk of our GDP – maybe a majority of it.

These entrepreneurs and SMBs aren’t shooting for the moon, but I bet they have a much higher statistical chance of success versus those who do shoot for the moon. Almost by definition, these folks notice a need and aim to fill it. Need is a big prerequisite to success. We’ve all been infatuated with an idea that we thought was really cool, even when there was no real need.

There’s a lot of attention given to the TINY, TINY percentage of hugely successful consumer-oriented tech companies. While we can learn from these successes, I think dwelling on them is akin to planning to be the next Derek Jeter.

Most of us are better off targeting a niche and growing from there. There’s nothing wrong with a “boring” niche business that few will ever hear of in the media, and in fact, I think it’s wise.

Some people say my viewpoint deprives us of the benefits of shooting for the moon. We need great breakthroughs, great athletes, great musicians, and literal trips of discovery. I don’t disagree.

I just think most people contemplating a business are better off starting with something more attainable and then building on that success. The irony is that most of them will be better off in 10 years than those who aimed for the moon.


Fun Stuff & Business History


@lancewalley
lwalley@chargify.com

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I co-founded Parallax in 1987 with my best friend. We were both fresh out of high school. We grew from a bedroom operation to a $3M/yr business.

I learned a TON at Parallax! We strugged for several years to find a market we fit, but once we did, were were able to "pivot" (today's term!) into that market and then execute on manufacturing, marketing, and distribution. We didn't even know the term "VC", so we *had* to make money! We took $20K from friends & family and had day jobs to bootstrap those early years.

As I left Parallax in Winter 1996, Radio Shack started carrying our BASIC Stamp computer.

I spent a few years trying to make money in the mobile-messaging space. Unfortunately, I learned lessons about how to spend all of my cash chasing a market that simply was not yet developed enough. I wish I had known about VC :-)! I closed up shop and put up a notice saying "goodbye" to my customers.

Which led to a San Francisco VC-funded startup in 1998. They were in the mobile-messaging space and were on the normal VC route as everyone else back then. Unfortunately, it didn't end pretty, but my friends and I learned a lot through the CEO, who was nice enough to tell us how things worked with his Board, the investors, etc.

I got laid off along with most other tech folks in SF in 2000. What does one do at a time like that? Start Quality Humans, Inc. as a way to offer my programming services to clients. QHI grew to employ 8 guys working around the USA.

My friend and QHI consultant, Tom Mornini, saw Ruby on Rails coming over the horizon, so we started offering Rails consulting. Within a few months, Tom noticed that Rails clients didn't want to worry about details; they just wanted to deploy their apps.

That led me to co-found Engine Yard in 2006 with Tom, Ezra Zygmuntowicz, and Jayson Vantuyl. We built a great business and then took VC after a year from Amazon, Benchmark, New Enterprise Associates, and others. I served as CEO until Jan, 2009, when we started building an executive team who can take EY up a few more notches.

I reflected on major pain points we experienced at EY, and recurring billing was one of them. That led me to Chargify.

In Chargify, I joined great folks from Grasshopper. It's been very cool working with the team as we grow Chargify in 2011.

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