Every time I watch Discovery Travel & Living on TV or read Lonely Planet magazine, I desperately long for travelling around the world. This feeling intensifies after reading posts such as 8 Exotic Destinations You Can Afford. I get all pumped up ready to pack my bags. But then I realize: Oh wait, I have a startup.

Startup requires a lot of sacrifices from you. You have to work extremely hard (think 100+ hours per week) for several years. All this hard work is justified in hope of an eventual big pay-off which may happen in a year, five years or may not happen ever. That big-payoff has potential to make you financially independent and then you can go travel the world (or explore other exotic interests such as taking a stab at string theory). But the big question is what if that eventual pay-off never happens? It is certainly a possibility because majority of businesses will either fail or will become self-sustaining for years to come. Acquisitions, IPOs and FU money is a rarity, not a norm.

I think the dilemma of exploring your passions v/s doing a startup is interesting especially for young founders who are in 20s or early 30s. Every sage professes that this is the right age to travel (or do crazy wild things) because you don’t yet have a family to support or other responsibilities which may chain you to a particular sedentary lifestyle. But an equally strong logic goes in favor of doing a startup: you don’t yet have a family to support, so you can fully dedicate yourself to a startup and increase chances of the eventual payoff. Then you have the financial freedom (hence and more importantly freedom of time) and to travel to exotic places you have always dreamed of.

I honestly don’t have a definite answer to this but as evident by working hard on my startup, you can see which camp I belong to. May be, one fine day in future, I will start on my own epic journey of 70 countries. Or, may be not.

I usually don’t do startup reviews here (because it is a personal blog) but today I will make an exception for my friend (on Hacker News): Patrick McKenzie. If, like me, you are also addicted to Hacker News you will probably know who Patrick is. He goes by his handle: patio11. Best known for his SEO, A/B testing and marketing automation advice, Patrick runs a niche business called Bingo Card Creator. The most exciting thing about his business is that finances are completely transparent! On his site, you can see all revenues, expenses, conversion rates and other interesting business metrics.

When Visual Website Optimizer (my startup) was in beta, Patrick gave loads and loads of feedback to improve the product. And when finally Visual Website Optimizer launched, he reviewed the tool in a post titled: Brining A/B Testing to Fortune 5 Million. That post alone brought hundreds of early adopters for the beta who then helped refine the product. In nutshell, my startup owes a lot to Patrick!

So, today I want to celebrate launching of Patrick’s second startup: Appointment Reminder. Quite obviously, his startup aims at simplifying the issue of clients forgetting the appointment which results in lost sales for a business. What I love about this business is that it solves a real business pain. With a plan of $79/month, even if Appointment Reminder is able to save one potential lost sale, it means the customer has got ROI out of investment. The service consists of an easy to use calender where businesses can enter their appointment with clients. Patrick’s service will then automatically call and sms the customer just before the appointment so s/he doesn’t forget to turn up. This surely is a simple yet immensely beautiful service that addresses real pain.

I wish Patrick best of luck for his new venture. He will be blogging extensively about Appointment Reminder on his blog. Make sure you follow his blog updates. I am sure it is going to be a fun (yet profitable) journey for him!

In my previous blog post titled “How making money changed my perspective on startup ideas“, I argued that business ideas don’t have a lot of value in isolation. It is the market opportunity coupled with good execution which generates value and revenues. In this post I want to go one step further and argue that most successful (software) companies got there by chasing a market opportunity and not by having a unique business idea.

Take example of any successful software company and you will find that their business idea was not unique. You say Facebook, I say Friendster. You say Google, I say Altavista. In fact, I think citing such examples is not a good idea because odds of a startup achieving a billion dollar valuation (and becoming a brand) are close to none. I am more interested in knowing how the “long tail” of software companies achieve million dollar plus revenues. That’s a realistic, achievable target and the odds of your startup becoming a Fortune 50000 business are much higher than it becoming Google. So, we should drop the dreams of IPO (for now), let’s just see how businesses make million dollar revenues.

How software businesses achieve million dollar revenues?

Go to Inc’s listing of 5000 fastest growing companies and sample a few company descriptions. For software hackers, go and study Inc’s listing of fastest growing software companies. What do you learn from this list? I realized two main patterns:

• I only recognized a few companies there (apparently you don’t need to be on TechCrunch in order to be successful)
• I did not see many “unique” business ideas here (all operate in generic industries such as backups, SEO, encryption, sales automation, etc.)

Almost every software company in that list is chasing a generic, huge market opportunity and executing really well. They have a 1000%+ growth rate today because they chose the market wisely and provided a solution that people wanted. They are not making millions today because they had a crazy good idea.

So, what’s the key point?

My key point here is that instead of coming with a business idea and then trying to validate it, why can’t you work backwards. Why can’t you first choose a market and then come up a solution to ease a recognized pain in that market. Even if you don’t make millions or achieve a spectacular growth rate, you will be at least profitable because your market is large and has people who are already spending money (I’m assuming your solution/product is good!). This scenario of slow growth and profitability in an already validated market is much better than the scenario in which you have one in a million odds of achieving hockey stick growth because of your new, revolutionary idea.

Key lesson: choose a market/nice first, come up with “idea” later. And then, execute really well and persevere for years before hitting million dollar revenue!

Note: if meaning of life and startups don’t excite you, it is recommended that you skip this post. You will find it boring.

I know this is a weird title. But I have finally convinced myself that you cannot afford to be too philosophical if you are doing a startup. Doing a startup could turn out to be a terrible experience for those who especially adhere to philosophy of Nihilism. For those who aren’t aware of Nihilism, it says that life has no meaning or purpose and is in fact pointless. This philosophy was popularized by the German philosopher Nietzsche and became popular with atheists. After all, if there is no God, what’s the point of life?

Back to startups. Working on a new venture takes an incredible amount of hard work and things go wrong time to time. If you want to make your startup successful, you will need to focus relentlessly for years and show a great deal of perseverance. Now if you are a kind of person who thinks too much about meaning of life and purpose of all that effort (especially during the bad times), you cannot be successful with your startup. How can you possibly justify all the hard work you are putting 24×7 into your baby when you are questioning the purpose of all this in back of your mind?

Unlike religions, Nihilism provides no inherent meaning of life. In fact, it says life is pointless and futile. This is a direct punch-in-the-face on your startup philosophy where you are required a wake up every single day full of energy and enthusiasm to work on yet another 18 hour marathon. If you believe in Nihilism and are doing a startup, you have to answer this question: why are you doing this? Is it to change the world or to make more money? Even when you achieve the goals (hello, million dollar exit) what’s the point of all that money when you are not even sure what’s the point of life?

In nutshell, you can’t afford to start questioning purpose of life when you are doing a startup. Those two are simply not compatible concepts which can co-exist in a single, worry-free brain. So, drop either Nihilism or your startup. (I recommend the former. See below).

PS: In case you are wondering which school of Philosophy I adhere to, it is Absurdism. Like Nihilism it says that there is no meaning of life, but it also further states that the purposelessness of life is what makes it exciting and that one has to keep doing things one feels like doing (hey, startups!) precisely because there is no grand purpose you should be working towards. Makes sense?

I’ve heard it a million times now: India is a great country for IT services, but there are no great technology product companies. After all, the golden trio of Infosys, TCS and Wipro is what defines India’s technology prowess. There is a certain degree of truth in that statement because the IT services industry has provided jobs to millions of Indian graduates and has definitely played an important role in crafting the Indian brand for outsourcing.

However, in technology (especially Web and Internet), geographies rarely matter. If we put aside VC/angel investment scene for a moment (that’s because it is emerges because a market exists to be exploited), why couldn’t Google, Amazon or Microsoft come out of India? I think it’s simply a matter of market-readiness coupled with informational advantage for US-based startups. Back in the days when these great product companies emerged, US (and to a lesser degree, Europe) was the only place where market existed. Google? Well, you needed Internet to be fully happening before a company like Google made sense. India was still lacking in that during 1996. Amazon? Well, you need people wanting to buy books over the Internet. India didn’t have a proper Internet, so obviously there was no e-Commerce market for Amazon to arise from India.

There is one major counter-argument to the “market” theory of non-emergence of product companies in India. In technology space, geographical proximity doesn’t matter a lot. Theoretically, a company like Google could have made a search engine in India and served the market in US. Well, theoretically, yes. But that’s why I mentioned informational-advantage. Back in 80s and 90s (and to a large extent, even now) the only way you could have felt the needs of market in US was to be actually in the US. (Because in India, you were posting physical letters. Email? What’s that?) In early 1990s, there was simply no infrastructure for Usenet in India, so how can you expect an Indian company (equivalent of Netscape) to have produced an Internet Browser. Even when Indians were sharp enough to be able to produce a Browser, there was simply no knowledge (and hence motivation) that such a thing should even exist.

If you now argue that why didn’t this informational-advantage work against emergence of IT services industry in India, you are completely missing my point. As I said, for product companies to exist, they needed a market or at least an intimate knowledge about that market. IT services companies had both: a) they had a hungry market in US who wanted to reduce costs; b) they had intimate knowledge of that market because the market crossed oceans to came looking for it. You see, the whole basis of saving costs through outsourcing was to surpass geographic boundaries, thereby utilizing India’s lower costs to their advantage. So, Indian IT services companies didn’t need to get intimate knowledge about the market — instead the market came for it, educating what its needs really are.

Thankfully, all that is going to change in years to come. Thanks to Facebookization and MTVization, at least in Indian metros, youth will have more-or-less exposure to similar global (notice I didn’t say US) culture and thus become basis of same market. Informational-advantage will disappear. Take any product: Twitter, Quora, LinkedIn, or even Foursquare and you will see users from all over the world. If they can use a world-class product, why can’t they make one? In my opinion, it is just a matter of time when US will loose the advantage gained by first-boom of silicon and Internet (think educational and investment infrastructure). After that, you will see great product companies from all over the world. And that’s when the real promise of Internet will get delivered: non-existent global boundaries.

Say cheers to the Internet!

I don’t know if it has been proposed earlier, but the other day I had an interesting idea about creating a variant of Turing Test and mashing it up in a Chataroulette kind of environment. As you may be aware, Turing test comprises of a game where a human chats with an unknown entity (which may be a computer or another human). The job of a human is to figure out whether the entity is human or a computer. It is proposed that if a computer passes Turing test (that is, if it manages to fool the human into thinking that it is a human), then we may call that computer “intelligent”. Unrelated to Turing test, Chataroulette is an online site where random strangers are paired up for chatting.

What if we mix Turing test and Chataroulette and then turn the whole concept upside down? Well, I think the consequences will be pretty interesting. Read on.

THE SETTING: An environment with multiple human and computer (chatbots) participants. A human participant is randomly paired with either a human or a computer.

THE RULES: Human has to convince during the chat that s/he is indeed a computer (chatbot)! After the chat is over (or during it), human can decide whether the other entity is human (who also makes a similar decision) or is a computer (which doesn’t make any decision). For a human, if the other entity decides that s/he is a chatbot, he wins 10 points and other entity loses 10 points. On the other hand, if a human makes a decision the other entity is a chatbot (and it is indeed true), s/he wins 10 points and chatbot (creator) loses 10 points. And if a human decides that chatbot is indeed a human, s/he loses 10 points while chatbot (creator) gains 10 points. In the end, the human or chatbot with most points wins the game (and a prize money?).

THE ESSENCE: So, every human in the game has to act like a chatbot while at the same time discern whether his chatting partner is an actual human (disguising as chatbot) or a chatbot (disguising as human). And every chatbot has to act like a human.

What makes this game interesting is the dynamics of chat and element of suspense. Imagine if you were in this game, you will suddenly start chatting in a goofy fashion (because you are emulating a chatbot). You won’t try to be too-smart (so that you are detected as a human) and you won’t try to be too-dumb (because you will be caught as an obvious deception). As a chat bot creator, you are not just relying on intelligence of your program to win the game. You’d also like to exploit the fact that a human will be over-cautious while declaring the program as chatbot (because humans also disguise as chatbot). So, the actual chatbot need not be a perfect chatting machine!

THE QUESTION: As a human, how do you win the game? What sort of conversation would you hold in this game to disguise yourself as chatbot? And what clues during the chat will tell you that the other entity is a chatbot?

I admit it: my previous (so called) “startup” Kroomsa was a failure. Back when I was starting up, I remember how game changing I thought it was. We wanted to revolutionize Indian music scene by inserting audio advertisements into music. We also vowed to donate 20% of proceeds from advertisements to a charity organization. Do you see how cool the idea was? Though this business, we combated piracy of music, made money for independent bands and helped society by supporting charities. All at once!

Except that we never made a penny out of the venture. First mistake: none of the team members was doing it full time. Second mistake: none of the team members had any experience in music industry. Third and biggest mistake: the idea was “cool”. To my hacker brain, this crazy business model was like dope. I distinctly remember being on a high for several days when I initially thought of that idea.

According to my then interpretation of “execution is important than the idea”, I started implementing the business model without doing any reality check at all. I built the music platform, roped in friends to help me, contacted a few initial music bands, uploaded music and added a dummy advertisement in songs! Before I realized my project was a startup. As time passed, I realized:

• Nobody likes to listen to advertisements in songs. In fact, people hated it. Lack of basic market research.
• Nobody in India likes to pay for music, let alone for independent rock music. Market was tiny.
• With no experience in music or corporate industry, we had no clue how to bring in advertisers. Lack of business and marketing plan.
• Finding good bands and signing them up was a non-scalable, extremely laborious task. So, our inventory of music was small. That meant even if we found an advertiser, our reach wasn’t so appealing. The chicken-and-egg problem.

Eventually we gave up on the startup when we realized: a) although we got covered in national newspaper because of the coolness of idea, it wasn’t exactly a startup; b) even theoretically, it will never grow big enough as a business (because market didn’t exist). In fact, even after months we hadn’t made even a single penny and there was no hope how it will make money.

In the process, my then 18-year old version learned the importance of business idea being grounded in reality. All this was extremely helpful when I founded Wingify last year. The first product is Visual Website Optimizer, an A/B split testing tool. Even though there are (or should I say inspite of) established companies in the market, the startup is making money and the revenues are steadily growing month-after-month.

Why is Visual Website Optimizer making money while Kroomsa didn’t? I think it boils down this:

The idea isn’t sexy. I am not going to change the world with it. But I am now solving a real pain-point in a big-enough market validated by presence of competitors. Since people are already paying for what I intend to offer, mine just needs to be easier, better or cheaper and the startup will make money and get customers. In short: I am making things that people want to pay for.

Yes, the phrase “make things that people to pay for” is worth repeating twice. Because I have now started making money with Visual Website Optimizer, my perspective on startup ideas has changed completely. A few years ago, my first reaction on getting a startup idea would be “Oh wow, this could be next Google. How do I get started implementing it?” Now my first reaction is on the lines of:

How will this make money? Who will pay for it? Is market big enough? And most importantly: do competitors exist?

So, next time you get a startup idea, ask yourself if established competitors (not other startups) exist in the market. If not, you better think twice because it could be an indication that the market doesn’t (or cannot) exist and you will never be able to make money in it.

Good luck with your startup ideas!

Imagine for a moment that you have created a new web app and after about 3 months of launching you are doing $2000 per month of sales. Would you consider yourself as a successful startup?

Well, you are already ahead of majority of startups which never get to see any revenue. So, in that way you are doing good. Plus if $2000 covers all your human and infrastructure cost, that means you have broken even and are doing really well. Is breaking-even the measure of success for a startup?

You certainly didn’t take the risk to earn just-enough money. Why would you leave your day job if your goal was to just break-even? So, this directly takes us back to our original question – when do you say that your startup is a success?

I believe answer to that question cannot be given in isolation. What startups need are benchmarks to compare. Knowing what other companies (in a similar position) are earning gives you a great perspective on your own revenues.

However, since startups are private companies, only the kindest of all share their revenue numbers. I compiled some of them in this post so that the startup community can benefit from it:

• Sales of Bingo Card Creator Per Month – ($4k/mo in sales) a single person, part-time effort over a number of years
• Pluggio Stats – ($1k/mo in sales) Twitter client, one man company
• WooThemes Mixergy interview – ($2million/year) 3 person company selling WordPress themes
• Affiliate media Mixergy interview – (from $400 to $400,000/mo) single person bootstrapped business
• HotOrNot Mixergy Interview – (around $7 million in annual revenues in about 5 years from bootstrapping)
• Evernote revenue details – (around $400,000/mo, venture funding > $15 million)
• MetaASO: A Bootstrapped P2P Startup From India (doing $1 million in revenues annually)
• Upside – elearning startup (did $50,000 in sales first year, size of team: 20)
• BalsamIQ (did $100,000 in sales in first 5 months, single person startup)
• A Year in the life of KashFlow – Numbers and Strategy (£500k sales in 2009)

Another great general source of revenue numbers is Flippa.com where people buy and sell websites.

If you have other links or resources, please share them with me. Happy to include them in the list.

(I am currently looking for link to a blog post where a team collaboration bootstrapped startup shared its numbers – $5-$10k/mo, any one having a link?)

UPDATE: Thankfully, I just found that link where that team collaboration shared its numbers. Their revenues are $15k per month and here is the link to Hacker News discussion.

World is busy. There are millions of startups. You maybe cool. But so you tons of other startups. You aren’t special. People have their daily lives and problems. Why should they care about your startup?

Lack of a boss. Period. The lack of a higher authority to give you your next todo item is the single most-important factor that makes entrepreneurship so hard. In school, you have a clearly defined schedule and you have teachers who give you homework which provides something concrete to do everyday. Then they have exams, a definite end point of the whole yearly effort. In college, you have required classes, projects and exams that keep you sane and provide a safety net from being direction less.

In corporate world, your boss sets your todo list. Most likely, every day when arrive at your desk and check your email you have something definite to do, failure of which is likely to annoy your boss. Day after day, the todo list keeps you busy, happy and gives a clear indication of progress.

But entrepreneurship is different. You have NO boss. Nobody would care if you are slacking a bit, nobody would care if you failed to meet your targets, no body would care if your performance is falling month after month. Being self-motivated over a period of years non-stop is hard. Unlike corporate world, you have to set your own agenda for every single day and you have to meet self-defined targets. What makes it even more dangerous that there is no-one (expect you) to notice that you failed to meet targets. There is no-one to do a review meeting or feedback session. It is just you!

That is what makes entrepreneurship so hard.