Tim Bauer’s Running Thoughts

For those not tracking the geek world, David Heinemeier Hansson is a rather successful coder that built some well adopted apps (e.g. Backpack) and a framework that got some people excited about its ease (Ruby on Rails).

O.k. So what …

Well, DHH went on a rant about how the new business model of FREE that everyone is jumping up and down about. Specifically saying how it was nuts. In his view, “real” business startups (not those looking to get bought by some big fish) should focus on bringing value that customers pay for … not how they can be free and gain adoption from that.

Novel thought … but why is he pointing this out?

As usual my raw notes are below, but here are a few key themes that jumped out me as I watched this webcast over lunch

In summary, gotta give hops to DHH for pointing out the frenzy in business today to launch businesses based on models that are not clear (just build membership) especially in a setting where VC’s are presenting before him. I think he is right to call for a refocus at the individual level especially as he talked about focusing on a niche and delivering to that niche. Much like the line Security through Obscurity … you can protect your business concept by starting small in niche markets. If you go after the mega models (like the next FriendFeed … you have big fish to swim with and will likely get eaten).

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http://omnisio.com/startupschool08/david-heinemeier-hansson-at-startup-school-084/21/2008
11:40 AM
……………○ 4/21/2008, 11:41 AM
…………………………§ 37 signals
………………………………………□ Not hiring
………………………………………□ Not looking for VC $
………………………………………□ Makes them different than most businesses
…………………………§ Their focus - how to be viable outside of big dogs getting bought out
…………………………§ New focus - Don’t focus on the $
……………○ 4/21/2008, 11:43 AM
……………○ A secret to making $ Online
…………………………§ Great application
…………………………§ ???
…………………………§ Profit
……………○ ??? = Price is key
……………○ Point is web 2.0 thinks everything is free … not true
…………………………§ BAUER COMMENT - BASECAMP and their model is paid … so his point is VC $ makes free ok
……………○ Simpler way to build a business
…………………………§ Have a price
…………………………§ Signup
…………………………§ Working 4-5 years … multi-million $ business
……………○ 4/21/2008, 11:45 AM
……………○ Shows campaign monitor (email service, track who clicks on what)
…………………………§ $0.01 per recipient
……………○ 4/21/2008, 11:46 AM
……………○ Shows FogBugz
…………………………§ On Demand
…………………………§ Buy the software
……………○ Show FaxItNice
…………………………§ Route around the fact that many businesses work w/ fax
…………………………§ Wrap it to a nice webservice
…………………………§ Pricing options
………………………………………□ $5 per fax,
………………………………………□ $20 retainer then a per send
………………………………………□ Send and receive faxes monthly
……………○ 4/21/2008, 11:47 AM
……………○ Not rocket surgery
…………………………§ Still hard but easier
…………………………§ Most businesses fail
………………………………………□ So why not try to be the next Google
…………………………§ Bad logic in his view
………………………………………□ Odds are not the same for barn burner … odds for a small niche product is better
…………………………§ Odds
………………………………………□ 1:10 is not facebook creation odds
………………………………………□ Example of relevance
……………………………………………………® 1:10 of making a million $
……………………………………………………® 1:10,000 for a billion $ business
…………………………§ Take better odds at smaller reward 1st … then go for the moon as the change in lifestyle from 0 to $1M and $1M to $1B is notable (the latter being small)
……………○ 4/21/2008, 11:52 AM
……………○ Example
…………………………§ 2000 customers
…………………………§ $40/month
…………………………§ 12 months
…………………………§ $1M year
…………………………§ 40,000 signups on trail … 5% conversion … 110 a day
…………………………§ …
…………………………§ What if you were happy @ $200k / yr = 400 customers @ $40/month
………………………………………□ BAUER COMMENT SO IT GETS EASER
……………○ 4/21/2008, 11:54 AM
……………○ Finding customers
…………………………§ Backpack
………………………………………□ Hard to get consumer to get people to pay
………………………………………□ Hard to establish business w/ that segment (consumer)
………………………………………□ Relaunch backpack 2 months ago … doubled the revenue by focusing on businesses
…………………………§ The Fortune 5,000,000
………………………………………□ The lifestyle business (mom & Pop store?)
………………………………………□ People make fun of that but he calls BS
………………………………………□ There is a lot of room in between
……………○ Craigslist
…………………………§ Without taking VC $ allows you to make the shots
…………………………§ Run @ your pace
…………………………§ $1M / yr … like no meetings
…………………………§ So its satisfying to not go for the brassring
…………………………§ Craig Newmark - $1B people are not happier
……………○ Good cause is incredibly hard and time consuming
…………………………§ Why flip business?
…………………………§ Enjoy it over 20 years
…………………………§ He questions the sell out startups … is it really the good life?
………………………………………□ Trade passion for meetings
……………○ 4/21/2008, 12:03 PM
……………○ This is not the movie industry
…………………………§ No need to dominate the box office
…………………………§ Solve small simple problems
…………………………§ Most of the great companies started small (200 companies)
…………………………§ Don’t Model after Facebook
……………○ VC Fuzz
…………………………§ Forget viral
…………………………§ Forget the overbaked ideas
…………………………§ Treat your customers nice and ask for $
……………○ Pressure to get started
…………………………§ People are selling stuff way before your idea
…………………………§ Sell it better
……………○ 4/21/2008, 12:06 PM
……………○ Basecamp
…………………………§ Developed w/ 3 people doing other stuff
…………………………§ Single server 1st year
…………………………§ Limited amount of time to work on something focuses your energy
…………………………§ He was contracting w/ 37 signals at this time … 10h/wk to develop basecamp
…………………………§ It makes the time really matter
…………………………§ Less time is a huge benefit
………………………………………□ BAUER COMMENT — Power comes from focus knowing value is each hour
…………………………§ Grew basecamp a year before you stopped doing consulting and just focused on basecamp
…………………………§ 7+ years for great businesses maybe longer
……………○ Don’t Overbuild
…………………………§ Deal with those issues later
……………○ Take it easy
…………………………§ There will never be less work
…………………………§ It will never be less
…………………………§ Amount of work in beginning creates more work
…………………………§ 14 hour days / 7 days a week … get out of that
…………………………§ Change the practices … or they will stick with you
……………○ 4/21/2008, 12:10 PM
……………○ Blame loss on someone else
……………○ 4/21/2008, 12:10 PM
……………○ Q&A
…………………………§ How does great achievement drive from small goals (i.e. how did Ruby on Rails happen)
………………………………………□ Solve simple problems. RoR was his effort to enjoy coding. Solve simple solution.
………………………………………□ Tons of VC come to them (RoR) .. .they say no … he uses RoR to build stuff … so he understands it …
………………………………………□ Solve simple problems that you are intimately involved with
…………………………§ What would you have done differently (BaseCamp, RoR)?
………………………………………□ Not much. Happy with results. Happy didn’t listen to give it away for free.
…………………………§ How many businesses are in the sweet spot of the fortune 5,000,000
………………………………………□ 500 to 1000 people … that is huge
………………………………………□ His focus
……………………………………………………® 3 people
……………………………………………………® 5 people
……………………………………………………® Guy doing something in his spare time
………………………………………□ Those people … want something that sounds like it works
…………………………§ The is no business too small for fortune 5,000,000
………………………………………□ Deal w/ people on monthly … you are not relying on 1 customer
………………………………………□ Big customers can yank your change
………………………………………□ Small customers but many you can control innovation
…………………………§ How stay focused
………………………………………□ How do you not get distracted … 10-14 hours a day
………………………………………□ Parent filter …
……………………………………………………® Joke
………………………………………□ Stop working in 14 hour a day … work 5 hours a day
………………………………………□ 37 signals is 4 day work weeks … 8 hrs a day … 2-3 hours productive
………………………………………□ Get 3 GREAT hours a day in

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