Lessons learned: How I founded, bootstrapped, grew and sold my web startup

Carl Mercier, Defensio

Getting underway in 5 mins!
by Jonathan Keebler at 4/6/2009 4:55:11 PM
by ScribbleLive via Flickr at 4/6/2009 4:56:55 PM
Carl was a founder of Defensio (Jan 09 acquired by Websense) defensio.com
by Jonathan Keebler at 4/6/2009 4:59:38 PM
Defensio was his 5th startup/project, serial entrepreneur. 1st startup: founded in 98
by Jonathan Keebler at 4/6/2009 4:59:49 PM
AjaxWhois.com: started up 2005, acquired 2008. Made decent money just selling ads ajaxwhois.com
by Jonathan Keebler at 4/6/2009 5:02:09 PM
MyBinaries.com Premium usenet provider, profitable from day 1. Everything was automated
by Jonathan Keebler at 4/6/2009 5:03:07 PM
Bincrawler.com One of the first search engines for alt.binaries
by Jonathan Keebler at 4/6/2009 5:03:37 PM
Found these smaller websites are easy to flip. Not massive dollars on each sale, but if you can do it every few years...
by Jonathan Keebler at 4/6/2009 5:04:30 PM
All his companies were bootstrapped by choice.
by Jonathan Keebler at 4/6/2009 5:05:03 PM
Making some $ on the web isn't that hard. Making 100s of millions is VERY hard
by Jonathan Keebler at 4/6/2009 5:05:44 PM
Building a great product is not enough (e.g VHS vs. Beta). Most programmers make the mistake of adding features and hoping that at some point, everyone will find your website and realize how great it is.
by Jonathan Keebler at 4/6/2009 5:05:55 PM
What makes you so special compared to other websites?
by Jonathan Keebler at 4/6/2009 5:07:32 PM
Your product is 100 %of your business. Marketing is the other 100%. e.g. Basecamp wihtout Ruby-on-Rails wouldn't be generating as much revenue, as well known.
by Jonathan Keebler at 4/6/2009 5:07:44 PM
Starting a website is like opening a business in the desert.
by MDM at 4/6/2009 5:08:05 PM
AjaxWhois.com got /.ed by a TechCrunch review. MyBinaries.com got a review on a very influential website. With Defensio: got dugg but didn't have a product yet, announcement was too early. Announce your product ~1 week before launch.
by Jonathan Keebler at 4/6/2009 5:10:13 PM
A lot of bloggers use Defensio, the ppl that talk about the product = really helped them
by Jonathan Keebler at 4/6/2009 5:12:40 PM
Stop thinking, start working. Forget business plans, business models. It doesn't work that way. If you start thinking like that, you'll never start anything.
by Jonathan Keebler at 4/6/2009 5:13:01 PM
Facebook, Twitter, YouTube = stupid ideas. All that matters is execution. You will never come up with the "best" idea. Listen to what ppl are asking for, follow your gut and go with the flow. Initial direction = never the final direction anyhow
by Jonathan Keebler at 4/6/2009 5:14:19 PM
Example: PayPal was going to be for sending money from Palm Pilot to Palm Pilot. Had a simple online demo to show how it worked = got huge traffic. Decided to change their business model to become the company they are today.
by Jonathan Keebler at 4/6/2009 5:17:43 PM
Great hackers (developers) rarely make great businesses. 1337_H4X0R != :epic_win
by Jonathan Keebler at 4/6/2009 5:17:53 PM
Web-businesses rarely succeed because of the technology e.g. Windows = not the best software.
by Jonathan Keebler at 4/6/2009 5:18:45 PM
There are exceptions to that rule: Google, Yahoo (founded by hackers). But stop underestimating the business guys. Hackers just love to code, not selling.
by Jonathan Keebler at 4/6/2009 5:19:48 PM
Starting a business is like running a marathon: will probably take 2-3x longer than you think. The beauty of startups: you have to be a little naive or you would never do anything. But it's also like a sprint: for a startup speed is your best weapon
by Jonathan Keebler at 4/6/2009 5:20:40 PM
Never give up. Instead, just switch gears: explore new things
by Jonathan Keebler at 4/6/2009 5:21:38 PM
Working alone sucks. Definitely try to find partners. Finding co-founders is hard. Best way to find ppl: in your local community e.g. DemoCamp, local Ruby, PHP usergroups. A good problem to have for him: knows too many people, too many potential cofounders for his next company.
by Jonathan Keebler at 4/6/2009 5:22:46 PM
Great strategies come up by bouncing ideas around.
by Jonathan Keebler at 4/6/2009 5:24:58 PM
Always focus on the end goal. If your bootstrapped, you can't just fool around. Focus focus focus! Developers like to build cool stuff, rewrite APIs, etc.: doesn't really matter in the end (doesn't get you to your end-goal of selling your company). Only execute on what really matters.
by Jonathan Keebler at 4/6/2009 5:26:43 PM
Never neglect the business aspect (e.g. PR, customer support). Should always have someone at your company looking for customers, partners; really is a full-time job. You should have a company blog; can blog about anything. Try to get on Digg
by Jonathan Keebler at 4/6/2009 5:28:09 PM
Passionate users are your best asset. You should do everything you can to please the early-adopters. Definitely have an API if it makes sense for your business. Always give great customer support.
by Jonathan Keebler at 4/6/2009 5:30:12 PM
Frugality rules: stop wasting money. "I'm the cheapest bastard alive!" Money in a startup = survival. Buys cheap office equipment, furniture. Spend where it matters = find a few good/key developers and designers.
by Jonathan Keebler at 4/6/2009 5:31:30 PM
You need to survive 2 years to know if your business is going to be successful. Do consulting on the side, etc. Your time and revenue projections are wrong. Don't spend money based on what you think you will be earning in a few months = never happens that way. Try a few things before you give up, do something about it before you run out of money.
by Jonathan Keebler at 4/6/2009 5:33:31 PM
How do you make money? It depends. Charging for your service is a good way to make money (unless you have a lot of money in your bank and don't need to); shouldn't probably also have a free service.
by Jonathan Keebler at 4/6/2009 5:35:24 PM
Competing against free is very hard. You want to stay away from a market like that. Defensio vs. Akismet: Akismet is basically a Wordpress arm and has a "weird" pricing model.
by Jonathan Keebler at 4/6/2009 5:36:56 PM
If your business model is ads, it doesn't work (unless the visitor profits from clicking your ads)
by Jonathan Keebler at 4/6/2009 5:38:45 PM
by ScribbleLive via Flickr at 4/6/2009 5:38:55 PM
Google Ads on AjaxWhois = "don't know if I even made $5". People ignore ads, don't even see them.
by Jonathan Keebler at 4/6/2009 5:39:58 PM
by ScribbleLive via Flickr at 4/6/2009 5:41:15 PM
Tie into normal workflow of user: what do users want to do when they search for a domain name? Probably buy it. So he puts GoDaddy discount prices on search results. Earned "5-figures" doing that on AjaxWhois.
by Jonathan Keebler at 4/6/2009 5:41:57 PM
#meshu Carl Mercier: if trying to build a business based on ads - forget it (unless user profits from clicking the ads)
by chrisjschmitt via twitter at 4/6/2009 5:42:42 PM
"I'm a big fan of bootstrapping", but not against VC at all. But if it's your first startup, do it the good ol' fashion way = bootstrapping. No boards, etc.
by Jonathan Keebler at 4/6/2009 5:42:49 PM
Joys of bootstrapping: independence, freedom, call your own shots, exit whenever you want (at the price you want), VCs are looking for the next Google (chances are it won't be you).
by Jonathan Keebler at 4/6/2009 5:44:07 PM
How many millions do you need to be happy? Most of you would be really happy with $1M
by Jonathan Keebler at 4/6/2009 5:44:16 PM
In tech world, most businesses sell for less than high 6-figures.
by Jonathan Keebler at 4/6/2009 5:45:07 PM
Example: VC funded company. VCs will want at least a 10x return. $1.5M investment needs to be turned into $15M (for 50% of company). Sale price of company is now $30M. Founders and VC each make $15M
by Jonathan Keebler at 4/6/2009 5:46:30 PM
If you got offered $3M for the sale of your VC-funded company, you may think it's a great idea = you get $1.5M. But for VC, they just get their money back so they won't sell. If they do sell, they will probably take all the money and you get nothing.
by Jonathan Keebler at 4/6/2009 5:47:51 PM
Example: Bootstrapped company. Build a great product, market it properly, have a price, generate real revenues, gain traction, get on people's radar (they won't just one day call you and say "we'll acquire you")
by Jonathan Keebler at 4/6/2009 5:48:15 PM
by ScribbleLive via Flickr at 4/6/2009 5:49:15 PM
Exiting for $30M is 100x less likely than exiting for $3M.
by Jonathan Keebler at 4/6/2009 5:49:37 PM
If you really need to raise money: launch and get buzz, show traction, let investors approach you, wait as long as you can (give away less equity)
by Jonathan Keebler at 4/6/2009 5:50:13 PM
He's from Montreal, incorporated in Delaware. Over 850,000 business entities have their legal home in Delaware. You probably want to raise money in US or be acquired by a US company.
by Jonathan Keebler at 4/6/2009 5:51:37 PM
Nobody wants to deal with a Canadian corporation, even less with a provincial company.
by Jonathan Keebler at 4/6/2009 5:52:44 PM
Delaware has great business laws. Merging a foreign entity with a DE Inc. is impossible. Also, it's cheap, fast and easy.
by Jonathan Keebler at 4/6/2009 5:53:42 PM
Karabunga Inc. Stucture: Karabunga Inc (owns Defensio, no employees, stock) Delaware C Corp, CM Enterprise (consulting company with all employees) in Quebec Inc.
by Jonathan Keebler at 4/6/2009 5:55:29 PM
by ScribbleLive via Flickr at 4/6/2009 5:55:36 PM
Advantages: Simple (and legal) structure, no day-to-day in Delaware, Canadian employees in a US corp is a pain, all IP is in Delaware, "real" company is in Delaware, easy to do business with or get acquired by Americans. R&D tax credits from Canada. "makes you feel warm inside"
by Jonathan Keebler at 4/6/2009 5:56:28 PM
Drawbacks: 2 companies to manage, you have to do things right or you might get in trouble, no capital gain excemption in Canada (750k). He did the math and the tax difference cost him $180K. Go to RBC Detura to get a US bank account.
by Jonathan Keebler at 4/6/2009 5:57:43 PM
Talk to a US-Canadian tax specialist. Don't take his word for it.
by Jonathan Keebler at 4/6/2009 5:59:37 PM
In conclusion, don't give up.
by Jonathan Keebler at 4/6/2009 5:59:51 PM
Recommends this video www.omnisio.com
by Jonathan Keebler at 4/6/2009 6:00:54 PM
He's now working with Websense
by Jonathan Keebler at 4/6/2009 6:01:26 PM
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by Jonathan Keebler at 4/6/2009 6:01:43 PM