Matt Unger

I like software

My Lowest Risk Possible Guide To Starting A Company

I've wanted to start a company since I was a kid. When I set out to start Roompact, I told people I could fall back on a programming job if it didn't work out. But in reality, that wasn't an option. I would have just tried to start a company again. And again. And again.

Starting a company comes with risk. You're likely to waste your time and money. The majority of new businesses fail. So I did whatever I could to improve my chances. Here are a few guidelines I followed to multiply my chances of success:

Software

Building software is cheap. You just need a computer. There are no prototypes to build, no physical goods to manufacture, and no inventory to purchase. You don't even need an office. If you start to build software and your company fails, you haven't lost any money. And then after you've built software and you're selling it, it costs very little to distribute.

Technical Founder

When you're building a new software company, the biggest expense is employee salaries. If you have a technical background, you'll save a ton of money because you won't need to hire anyone until the company is sustainable. If you don't have a technical background, you have a couple options. You could find a technical co-founder, which is usually difficult. You could also teach yourself how to program. There are plenty of free resources to do this. You don't have to be great. You just have to be able to get by until you're able to build out a team. Though I certainly can program and built the first version of Roompact, I am by no means a good programmer. I was our first programmer, and now I am our worst programmer.

decisions, decisions

Business To Business

There are two types of businesses. One is a B2C (business to consumer) company, which sells something to individual people, like Starbucks does. But I'm an advocate of creating a B2B (business to business) company, which is a business that sells something to other businesses.

At each business you sell to, there's one person who has the power to buy software for many people -- maybe even thousands of them. Each relationship you create is powerful.

On the other hand, B2C is transactional. You have to constantly test dozens of processes and marketing efforts. People are numbers. Their decisions and preferences are statistics. You don't get to have as deep of a relationship with your clients.

B2C's numbers game can also require a lot of money for advertising. You need to do some pretty crazy things to acquire new clients. Blue Apron spends nearly $500 to get each individual new client. I just need to email someone.

Niche Industry

A lot of people overlook niche industries because they don't have a market potential of billions of dollars. They're not as appealing, so there isn't very much competition. Due to the lack of competition, you'll find that most software companies in these niche industries:

  1. Do not prioritize good design and easy-to-use software
  2. Use old technologies that are very slow
  3. Do not make continuous significant improvements to their software
  4. Are sometimes hostile towards their own clients

If you find an industry like this and you deeply care for the people who use your software, you'll be able to run laps around everyone else. The market might not be the biggest, but it'll be a lot easier to succeed.

Self-Funded

Self-funding is intertwined with every previous point here. Building software with at least one technical founder requires less money. Selling your product B2B allows you to get the most value for your efforts. And niche industries are usually too small to interest big investors -- that's the same reason they're often overlooked. Overall, if your company relies on outside funding, it is inherently risky. That's just one more third party you need to depend on.


Even when you follow these guidelines, you'll still have to work your butt off and you won't eliminate all risk, but it's a good start. You'll notice that these are "initial decision" guidelines. You can choose to move forward with these guidelines at the very inception of your business. Other than the "technical founder" requirement, these don't require a lot of work -- they're just basic decisions.

Matt Unger

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