Things you should know before starting a software business

I’m trying to write this post for some time now – I kept on postponing because I needed some time to understand things first. I’ve entered the software business back in 2001 – as a fresh graduate, which I think makes me young enough to try to keep up with things and old enough to have some background under my belt.

The thing is that, well, things have changed dramatically especially in the last 5 years. While back in the 2000’s things started to got back to normal after the bubble (and by normal I mean you had to prove strong sales and forecasts to sell a business) nowadays things start to look blurry again. Just look at most big software companies acquisitions – it’s not anymore about how much you can sell, but about how many users you have. The freemium era.

And that’s kind of hard to understand for the It people coming from the early days. I mean, how on Earth do companies that make only free products with a paid upgrade work? Or even more, companies giving everything for free, getting thousands of users, then getting acquired?

This means there are a few things you should know before starting a new business in software nowadays.

  • Bootstrapping is easier. And harder in the same time. It’s easier because creating a product is cheaper (crowdsourcing for development, cloud for hosting, young people are eager to work from home). But harder because there are plenty of “free” products out there, made by companies that don’t really follow real economical principles (meaning they don’t make a profit but they get acquired for millions based on their users base.
  • Everything has been done before. And still new things appear all the time. Because it’s so easy to create a new software company nowadays and have products rolling out, I think 99.99% of the ideas have been done before. You think about a mobile application to do x, well, it takes about 5 minutes that there is an application that does x. You plan to develop IT services, well, it’s done remotely from China. But, on the other hand, even more successful products and customized IT services and IT support are developed launched and sold each year. How many times you have told yourself – what an easy idea, why on Earth I couldn’t come up with it? Well, because it’s all about the little details that make the change.
  • Build it and they will come it’s no longer valid. Unless you’re getting social traction. Remember the times when you only had few HTML editors? Clearly, any innovation or new product in the HTML editing area were destined to success. Nowadays, as I said before, we already have everything available. But it’s amazing what the powers of social media can do for a product.
  • Everything is done in China. And yet just few IT jobs were lost anywhere else. I remember a few years ago everybody got paranoia that China and India are causing IT jobs loss in the Western World. But, well, the thing that actually happen is that IT grew more than the outsourcing countries could provide.

It is hard to become successful in software nowadays and not because of the crisis or because you can’t find a new idea. It’s hard because things change so fast and everybody is so competitive. But hard is good, because otherwise everybody would do it and you wouldn’t have any rewards down the road.