Jennifer, one of my high school friends living in Montreal, recently started her own hair salon. Her employees live in Boston and Florida whereas her biggest customer is located in New York. The previous declaration makes no sense given the industry, but it does make sense in ours! Software can be produced anywhere and delivered to customers worldwide via the Internet. Furthermore, our increased connectivity helps businesses target very specialized niches which would not be viable on the local market. (For an overview of the subject, please refer to the excellent The Long Tail.) We're pushing it one step further with LavaBlast, which we started about a year ago, because our team is distributed. We can be categorized as a bootstrapped MicroISV (less than ten people producing software products with no outside funding), and we'd like to share some of our experiences.

We love to read about other startups and why they succeeded, such as Jessica Livingston's Founders At Work, but we're even more interested in companies that failed. On one side, it is very motivating to ready books such as Founders At Work and learn how the guys behind Hot Or Not started it all and got lucky with a very simple idea. On the other hand, knowing more about failures helps you learn from other people's mistakes. Books like Facts and Fallacies of Software Engineering helped, but were are not start-up focused. IMG_2940 If you're considering starting your own software startup, do take the time to read up on why startups fail, even if it is not the subject of today's post.

I hope you'll enjoy reading this series of posts and will be unable to resist posting comments and starting interesting discussions. Part 1 focuses on the basics, Part 2 revolves around communication, and Part 3 talks about what we've learned concerning marketing, sales, and growth.

Our Context

LavaBlast Software was started by two recent graduates from the software engineering program at the University of Ottawa in Ontario, Canada. After the bachelor's degree, Etienne moved to Montreal because of an attractive employment opportunity while Jason completed his master's. Both have been programming since their early teens on a wide variety of software systems in their various positions at companies of all shapes & sizes. From tiny web design shops, to medium-sized software firms in the electric industry, to second language schools for civil servants, to large Government departments, the founders had the chance to play with software from two perspectives. One one side we have small software companies who live and breathe software and on the other we have large-scale businesses in which most people are not necessarily computer-savvy (except for the IT departments). Additionally, we sidelined as male strippers at bachelorette parties, to pay for our university studies.

It did not take long to discover that we were so passionate about software that we wanted to start our own software company, not work in corporate Dilbert-reading sweatshops. Of course, this is simply caricature, as we worked on very interesting/challenging systems while in larger companies. There's nothing wrong with working in IT departments, but it wasn't a fit for our entrepreneurial drive. On top of that, we love working on projects where we get direct feedback from our customers, instead of internal company tools.

It was clear we were to start a software company, but did not know what nor when. The original plan had been acquire experience and a monetary cushion to allow us to start working on the next big thing. Before taking the plunge and leaving our day jobs, we wanted to have a good idea. We considered various ideas, but being recent graduates with student loans, going out on a limb and working with no revenue on a magical idea for an undetermined period of time was not a very attractive solution. However, we did find a very attractive business opportunity with people with whom Jason had been working for almost three years, on various web development projects. These partners have franchised their business and have acquired precious experience over the years. They are very knowledgeable and have a clear vision of the various business processes from the point of view of franchisors. After 20-some years in the business, they know what software is required, what to focus on, and how to support it.

Discussions ensued, and LavaBlast was formed. We produce industry-specific software solutions for franchisors. All our products are integrated via FranchiseBlast, which cuts down franchisor/franchisee costs at the same time as favoring re-use from a software engineering aspect. We have a base product offering which we tailor to our customer's specific business processes. In a sense, we sell software products with a side order of software services.

In summary:

  • No outside funding.
  • Small distributed team.
  • A mix of products and services.
  • We eat our own dog food.

Lesson 1) The Great Idea

Simply put, chances are you won't think of the next big thing. Even if you do, you probably won't have the resources, experience, or contacts, to turn your idea into billions. We were not expecting miracles but were on the lookout many months in advance. One thing we learned while reading Founders At Work is that many software startups are formed without the faintest clue of what the product/service will be. The most important part of the company is not the idea but the people. A small and closely knit team of people who've worked together in the past is a recipe for success, regardless of the idea. Indeed, execution is key! Partnering with people who have a track record of bringing ideas to reality is, in our opinion, the most important part of the business.

We are very happy that we did not wait on having a brilliant breakthrough idea and started our company immediately. We evaluated opportunities and picked the one that made the most business sense, knowing we can adapt along the way. Having made the plunge early in our careers, we felt we didn't have anything to lose because we didn't have that many constraints such as leaving a high paying job, a mortgage and student loans to pay, kids to feed, etc. The more acquainted you get with stable employment, the harder it is to leave. Still, it is worth mentioning that while we were very comfortable with our technical skills, our network of contacts is not as large as it would have been if we had been under someone else's employment for 5-10 years. On the bright side, we don't have 10 year of accumulated bitterness to carry around and we're in the best phase of our development careers (from a production standpoint).

Simply put, talk to people around you and reflect on what pieces of software would scratch your itch. There are business opportunities all around you... all you need to do is decide on what's the best fit for your current situation! Are you smart and can get things done? Are you able to adapt to your environment and pursue different opportunities when they present themselves? If so, don't wait for an idea that may never come and enjoy the ride!

Lesson 2) Eating your own dog food

It's been said time and time again, you need people using your software in order for its quality to reach high standards. Here at LavaBlast, we're fortunate to be able to develop UsWare because we're involved in our partner's the day-to-day franchise operations. As developers, we proactively solve problems before anyone reports them because we feel like we are part of the franchise. Furthermore, since we built our infrastructure to be re-usable, we recently launched SupportBlast as a clone of our FranchiseBlast solution. SupportBlast is basically our mini-CRM and we've integrated our software registration and license key generator in there. Although the strategy does have its limitations, using our own products helps us boost our software quality. Furthermore, for our kind of software, it would have been impossible to develop anything coherent without actual customers.

It takes ten years to build a great software product and it also takes ten years to become a software grandmaster.  You understand that quality takes time and effort and you'll only discover your software's weaknesses by listening to critique. It's better to be harsh on yourself than listening to someone scream over the phone, don't you think? 

Lesson 3) Mix of products and services

As stated previously, our company has currently received no outside funding (nor have we invested millions from our personal fortunes). We doubt angel investors or venture capitalists would be interested in our company because we're not aiming for a 100:1 return on investment. We could change our strategy and go for an all-or-nothing gamble, but we're more interested in growing our company organically. We know our company can be profitable using our current strategy, but we understand that we are not going to be the next FaceBook and my guess is that your company might fall into this same category. More importantly, we agree with Spolsky's model of company growth, and aim to be profitable from day one.

The main question for our type of company is how can we pay the bills while developing our product? The holy grail for return on investment in our business implies no additional work on the developer's part to support a new customer. Microsoft doesn't need to make adjustments to Word to sell it to a new customer and FaceBook allows its users to change the content of their personal pages themselves. On the opposite end of the spectrum, a good web design firm will create interfaces from scratch, adjusted to the needs (and tastes) of each of its clients. In the end, we want to be a product company but we need to build good products (and accumulate a critical mass of customers) before it pays the bills. We wanted to start our business immediately, not work on it on weeknights and during weekends for a couple years. Because of this, we decided our main interest was our product line but we'd perform services on the side as short-term an income generator.

We were open to external contracts, but did not end up doing any work outside of our product line. We're very happy of this fact because the solution managed to sustain its development without having to dilute our efforts with side-contracts (such as bachelorette parties).

Conclusion

Have fun but expect a bumpy ride. If you're not happy in your own company, doing what you want to do, you have a problem. Still, as with anything, you'll have some good days and some bad. In a startup, expect a roller coaster of emotions because you'll certainly get very excited by a certain situation but crash & burn when it doesn't materialize. In addition, not all work is exciting. You're starting a company and you have to do everything yourself. Doing accounting at 11PM on a Saturday night is not my idea of fun. Generally, however, it is very gratifying to build your own company from scratch and if you're fit for the challenge, I encourage you to try it out! The worst thing that can happen is that you will fail, lose some cash, gain valuable life lessons, and go back to working for someone else (or start over with a new idea :)).

Come back next week for part 2!

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