THE WEB STARTUP SUCCESS GUIDE doc

FROM DEVELOPER TO FOUNDER
The Web Startup
Success Guide
BOB WALSH
FOREWORD BY JOEL SPOLSKY,
CEO OF FOG CREEK SOFTWARE
“This book is a fantastic resource for anyone doing
a web startup or a software startup.”
—JOEL SPOLSKY
THE WEB STARTUP
SUCCESS GUIDE
Bob Walsh
The Web Startup Success Guide
Copyright © 2009 by Bob Walsh
All rights reserved. No part of this work may be reproduced or transmitted in any form or by
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This one is for Sake, who for nearly
23 years was a very good boy.

Contents at a Glance
FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

ABOUT THE AUTHOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
ABOUT THE TECHNICAL REVIEWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xv
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
CHAPTER 1 INTRODUCTION: WHAT WAS IS NOT WHAT IS . . . . . . . . 1
CHAPTER 2 VALUE IS THE CORE OF YOUR STARTUP . . . . . . . . . . . . . 25
CHAPTER 3 SO MANY PLATFORMS, SO MANY OPTIONS . . . . . . . . . . 49
CHAPTER 4 TOOLS AND GROUPS FOR STARTUPS . . . . . . . . . . . . . . . 99
CHAPTER 5 MONEY: RAISE, MANAGE, MAKE . . . . . . . . . . . . . . . . . . . 145
CHAPTER 6 SOCIAL MEDIA AND YOUR STARTUP . . . . . . . . . . . . . . . 209
CHAPTER 7 CLARITY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
CHAPTER 8 GETTING IT DONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
CHAPTER 9 SIX WISE PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
CHAPTER 10 WHAT’S NEXT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407

Contents
FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
ABOUT THE AUTHOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
ABOUT THE TECHNICAL REVIEWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xv
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
CHAPTER 1 INTRODUCTION: WHAT WAS IS NOT WHAT IS . . . . . . . . . 1
Please Insert Chip into Brain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
What’s Changed Since Micro-iSV: From Vision to Reality . . . . . . . 2
The New Online Economic Reality and Your Startup . . . . . . . . . . 3
A Ridiculously Short History of Software Startups . . . . . . . . . . . . . 3
So, What’s a Startup? And Why Would I Want to Be One? . . . . . . 8
Startup Flavors—Take Your Pick . . . . . . . . . . . . . . . . . . . . . . . . . 9
When Is the Right Time to Jump?. . . . . . . . . . . . . . . . . . . . . . . . 14

Neil Davidson, Business of Software Conference . . . . . . . . . . . . 15
Don Dodge, Director, Business Development at Microsoft . . . . 17
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
CHAPTER 2 VALUE IS THE CORE OF YOUR STARTUP . . . . . . . . . . . . . 25
Value and Problems, Problems and Value. . . . . . . . . . . . . . . . . . 25
Beginning at the Beginning Is Just a Beginning . . . . . . . . . . . . . . . 25
Wally’s Startup Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Implications of Wally’s Startup Law . . . . . . . . . . . . . . . . . . . . . . . 33
Have a Great Startup Idea? Hmm. Maybe Not. . . . . . . . . . . . . . 36
Where Do You Find Problems? . . . . . . . . . . . . . . . . . . . . . . . . . 41
Ten Startups Not to Do, and Why. . . . . . . . . . . . . . . . . . . . . . . 43
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Contents
viii
CHAPTER 3 SO MANY PLATFORMS, SO MANY OPTIONS . . . . . . . . . . 49
Then and Now . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Everybody Wants to Be in the Platform Business . . . . . . . . . . . . 50
Evaluating Platforms: A Checklist. . . . . . . . . . . . . . . . . . . . . . . . . 51
Software As a Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Saas Enterprise Reality Check: Rick Chapman, Softletter . . . . . . . 56
Platform As a Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Loving Google App Engine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Microsoft’s Azure Services and Mesh Platforms. . . . . . . . . . . . . . 64
Social Networks As Platforms. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Mobile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Andrey Butov, Antair Corporation . . . . . . . . . . . . . . . . . . . . . . . 76
Eric Chu, Google Mobile Platforms Program Manager . . . . . . . . 79
Hybrid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Jeff Haynie, CEO, Appcelerator . . . . . . . . . . . . . . . . . . . . . . . . . 83
Peldi Guilizzoni, Balsamiq Studios . . . . . . . . . . . . . . . . . . . . . . . . 85

Open Source/CMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Mac Desktop and Windows Desktop . . . . . . . . . . . . . . . . . . . . . 91
Scott Morrison, Founder, Indev . . . . . . . . . . . . . . . . . . . . . . . . . 92
Gwen Hilyard, Cofounder, Brisworks . . . . . . . . . . . . . . . . . . . . 96
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
CHAPTER 4 TOOLS AND GROUPS FOR STARTUPS . . . . . . . . . . . . . . . 99
Back in the Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Tools for Startups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Subscription Startup Communities . . . . . . . . . . . . . . . . . . . . . . 119
Rob Walling, The Micropreneur Academy . . . . . . . . . . . . . . . . 120
Gene Landy, IT/Digital Legal Companion Author
and Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Startup Organizations and Groups Online and Off . . . . . . . . . . 128
Shaherose Charania, Women 2.0 . . . . . . . . . . . . . . . . . . . . . . 132
Startup Groups Near You—Offline and On . . . . . . . . . . 133
Large Vendor Programs for Startups. . . . . . . . . . . . . . . . . . . . . 139
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
CHAPTER 5 MONEY: RAISE, MANAGE, MAKE . . . . . . . . . . . . . . . . . . . 145
Follow the Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Raising the Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Understanding the Funding Ladder . . . . . . . . . . . . . . . . . 147
You Are Not Alone . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
The Basics of the Funding Game. . . . . . . . . . . . . . . . . . . 151
The Art of Raising Angel Capital, by Guy Kawasaki . . . . . . . . . . 151
The Top Ten Lies of Entrepreneurs, by Guy Kawasaki . . . . . . . 161
Contents
ix
Rebecca Lynn, Principal, Morgenthaler Ventures. . . . . . . . . . . . 165
Jo Anne Miller, Partner, Milk Street Ventures . . . . . . . . . . . . . . 169
Cindy Padnos, Managing Director, Illuminate Ventures . . . . . . . 173

Stephanie Hanbury-Brown, Founder and Managing Director,
Golden Seeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Startup Incubators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Managing the Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Gene Landy, Attorney and Author of IT/Digital
Legal Companion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Mairtini Ni Dhomhnaill, Senior Vice President,
Accretive Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Making Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Dave Collins, Founder, Shareware Promotions . . . . . . . . . . . . 201
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
CHAPTER 6 SOCIAL MEDIA AND YOUR STARTUP . . . . . . . . . . . . . . . 209
It’s All About Attention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
The Big Idea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Setting Up Your Social Media Basic Radar. . . . . . . . . . . . . . . . . 212
The Startup Company Blog . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Andy Wibbels, Six Apart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
Welcome to the Land of Twitter . . . . . . . . . . . . . . . . . . . . . . . 230
The New News Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Marshall Kirkpatrick, Lead Writer, ReadWriteWeb . . . . . . . . . . 235
The Editor Is In . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
Al Harberg, President, DP Directory, Inc . . . . . . . . . . . . . . . . 239
So Is the Reporter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Luke Armour, PR Coordinator, blogtalkradio.com . . . . . . . . . . 244
Startup PR the Right Way . . . . . . . . . . . . . . . . . . . . . . . . 246
Your Other Title: Chief Community Officer . . . . . . . . . . . . . . . 247
Ginevra Whalen, TypePad Community Manager,
Six Apart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Matt Johnston, VP of Marketing & Community,
uTest, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Veronica Jorden, Communications Manager, Blellow . . . 251
Maria Sipka, CEO, Linqia . . . . . . . . . . . . . . . . . . . . . . . . 254
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
CHAPTER 7 CLARITY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
If You’re Not Clear, You’re Not Selling . . . . . . . . . . . . . . . . . . 267
The Unique Selling Proposition Pattern . . . . . . . . . . . . . . . . . . 269
Case Study: Mint.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Case Study: RescueTime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
Contents
x
CHAPTER 8 GETTING IT DONE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
This Might Hurt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
GTD in Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
David Allen, Author, Speaker . . . . . . . . . . . . . . . . . . . . . . . . . . 302
Matt Cornell, Productivity Expert . . . . . . . . . . . . . . . . . . . . . . . 315
Online Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
Developer Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
Startup Founder Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . 333
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
CHAPTER 9 SIX WISE PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
Some People You Ought to Listen To . . . . . . . . . . . . . . . . . . . 341
Dharmesh Shah, Founder, Chief Software Architect, HubSpot . . . 342
Eric Sink, Founder/Ceo, SourceGear . . . . . . . . . . . . . . . . . . . . 353
Joel Spolsky, CEO and Cofounder, Fog Creek Software . . . . . . 362
Pamela Slim, Author and Coach . . . . . . . . . . . . . . . . . . . . . . . . 374
Lou Carbone, Founder and Chief Experience Officer,
Experience Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383
Guy Kawasaki, Author and Founder, Alltop. . . . . . . . . . . . . . . . 392
Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396

CHAPTER 10 WHAT’S NEXT? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399
Intro to the Outro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399
There Have Never Been More Opportunities for a
Startup to Succeed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399
The Quality of the Idea Behind Your Startup’s Product
or Service Is Paramount . . . . . . . . . . . . . . . . . . . . . . . . . . . 400
Your Idea Has to Hold Real Appeal to at Least One
Specific Market Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . 401
Serious Value + Great Customer Experience Means
You Get Taken Seriously. . . . . . . . . . . . . . . . . . . . . . . . . . . 402
If You Play by Everyone Else’s Rules, You Lose. . . . . . . . . . . . . 402
Social Networks Are Key to Your Success . . . . . . . . . . . . . . . . 403
Have a Plan to Get Through the Bootstrap Valley of Death . . . 404
Money Is the Lifeblood of Startups—Manage It Well. . . . . . . . . 405
One Final Bit of Advice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
xi
Foreword
Last summer, Paul Graham invited me to stop by his place in Cambridge,
Massachusetts, for an intimate dinner. Just him, his wife, and the founders
of three dozen extremely young startups in the Y Combinator program, a
boot camp/incubator/angel investment thingy.
“Would you be willing to speak to these founders about, I don’t know,
maybe pricing?” Paul asked me.
“Sure!” I said, and he whistled loudly to get everyone to quiet down.
I didn’t really have a speech prepared. There was no PowerPoint outline
I could use as a crutch. The room was jam-packed. All eyes were on me. I
didn’t know what I was going to say.
I thought I’d try a gambit.
“So . . .” I said. “Any questions?” Ten hands shot up. “Go ahead,” I

said, pointing to a kid in the front row who, I imagine, had just gotten his
braces off the week before.
And for almost two hours straight, these poor kids asked me the most
basic questions imaginable about the business of startups. Pricing. Features.
Marketing. Invoicing. They had so many questions.
I gave them as good a brain dump as I could on each topic. They sat
raptly and asked intelligent follow-up questions.
These were smart kids, mind you: usually top computer science grad-
uates and plenty of experienced programmers. But for all their coding
skills, they didn’t really know the first thing about making a business
successful.
Which is OK. They’ll learn. It’s not that hard. The hardest part is real-
izing that even though you’re making an Internet company, writing the code
and getting it to work is only a small part of the effort, and not necessarily the
most critical one. The business side is just as crucial.
Foreword
xii
There’s a lot you’re going to need to learn to make your startup
awesome. And this book that you hold in your hands, this very book, is a
splendid introduction to the topic. Heck, I’ve been running Fog Creek for
nine years now; I think I know a thing or two about a thing or two, and I
learned something new on every page.
Every single page.
Yes, even that page with the interview of me.
This book is a fantastic resource for anyone doing a web startup or
a software startup. Bob Walsh will teach you how to make your startup
successful. Buy it, read it, put it under your pillow. Then buy copies for
your cofounders. And go out there and nail it with a killer startup that
makes the world a better place.
Joel Spolsky

CEO, Fog Creek Software
xiii
About the Author
My name is Bob Walsh (),
and I believe that startups and microISVs (one-person
software companies) represent the future of the
global software industry and of the billion-person
Internet to which we are all now connected. I believe
this so strongly that this is my fifth book on the sub-
ject. My previous books are Micro-ISV: From Vision to
Reality (Apress, 2006), Clear Blogging (Apress, 2007), MicroISV Sites That
Sell! (ebook, 2008), and The Twitter Survival Guide, with Kristen Nicole
(ebook, 2008).
In addition, I do a podcast with cohost Pat Foley (The Startup Success
Podcast, at
) and write a blog (47 Hats,
at
). I also comoderate Joel Spolsky’s Business of Software
forum (
/>My day job is consulting with startups and microISVs on how to increase
their sales by better explaining their software on their web sites. But my
real job since 2007 has been to recreate myself from a Windows desktop
developer into a Rails web developer so that I can build and launch a faster
way for startups to succeed: StartupToDo (
).
Before I got into all of the foregoing activities, I was a custom soft-
ware developer for 20-plus years, and before that a reporter. I like what
I’m doing now a lot more than either of those past careers!

xv

About the
Technical Reviewer
Thomas Rushton has been programming since he got his first computer,
a Sinclair ZX80. He has progressed through creating complex workflow
and document management systems for financial and legal organiza-
tions. He has a BSc in computer science from Durham University and
spent some research time in the field of software quality before moving
into the more financially rewarding IT career roles of programmer, DBA,
and consultant. He will soon be putting some of Bob Walsh's techniques
into practice by creating his own microISV.
When not slaving away over a hot keyboard, he enjoys spending time
with his wife, Sarah, their young son, William, and his double bass.

xvii
Acknowledgments
Writing a book—especially the way I do it, which is to ask a lot of knowl-
edgeable people a lot of pesky questions—means you have a lot of people
to thank for making it possible.
First among equals has to be Joel Spolsky, who in 2005 helped open
the door for me at Apress and who was kind enough to write the Foreword
to this book and to give me a long interview.
Next I wish to thank Pam Slim, Lou Carbone, Dharmesh Shah, Eric Sink,
David Allen, and Guy Kawasaki for sharing first with me and now with you
their time, knowledge, and insight.
But wait, there’s more! For all their help I also offer hearty thanks to
the following: Neil Davidson, Don Dodge, Wally Wallington, Paul Tyma,
Shawn Anderson, Shane Corellain, Corey Maass, Steve Grundell, Stephen
Fewer, Simon Shutter, Cedrik Savarese, Rick Chapman, Dave Westwood,
Pat Foley, Andrey Butov, Gavin Bowman, Eric Chu, Jeff Haynie, Peldi
Guilizzoni, Scott Morrison, Gwen Hilyard, Richard White, Rob Walling,

Gene Landy, Alvin Tse, especially Shaherose Charania, Joanne Yates,
Brandon Zeuner, Rebecca Lynn, Jo Anne Miller, Cindy Padnos, Stephanie
Hanbury-Brown, Mairtini Ni Dhomhnaill, Alain Raynaud, Amy Hoy, Dave
Collins, Matthew Bleicher, Ian Landsman, Andy Wibbels, Mike Gunderloy,
Marshall Kirkpatrick, Rafe Needleman, Al Harberg, Leslie Suzukamo,
Luke Armour, Ginevra Whalen, Mat Johnston, Veronica Jorden, Maria Sipka,
Aaron Patzer, Tony Wright, Matt Cornell, and Tim Haughton.
In addition, I’d like to thank Thomas Rushton for again doing a
great job on technical review, Sofia Marchant for managing this project,
Jonathan Hassell for prodding me when I needed prodding, Elliot Simon
for copyediting my prose into something readable, and Laura Cheu for
managing the book’s production.
Finally, as always, I give deep thanks to Tina Marie Rossi for her
support and love.

xix
Introduction
All I was doing back in 2005 was looking for a book on Amazon, honest!
I’d just finished writing MasterList Professional, a Windows personal task
manager, of which I planned to sell a million copies so that I could retire
forever from my contract programming job. Only one problem: I couldn’t
find a book on Amazon that explained how to sell those million copies.
After 20+ years of dealing with clients and corporations, specs and custom
apps, I knew zip about marketing, branding, positioning, software down-
loads, credit card processing, small business legalities, and the like. I
needed that book. I didn’t find it.
So I wrote Micro-ISV: From Vision to Reality (Apress, 2006). It did well. I
started spending more and more time talking with the kind of people I
liked, comoderating a forum on the business of software, conducting inter-
views for a podcast, and then working for actual money with startups and

microISVs (self-funded startups). Then I wrote another book (on blog-
ging), followed by two e-books, and then created a new podcast (this time
my own, The Startup Success Podcast, with the able help of my cohost,
Pat Foley).
I like startups. Startup founders have a dream, a passion, a desire to
make something happen, not just to do what others have done. But by
mid-2007 I had come to realize three things. First, there had to be a better
way to bootstrap a software business than either to hire someone expen-
sive like myself or to flail at it week after week. From this realization was
born the idea of StartupToDo.
Second, I realized that to create StartupToDo I’d have to go from being
a Windows desktop programmer to being a Ruby on Rails developer conver-
sant in JavaScript, Linux server admin, CSS—all the things I’d avoided up
until then. I thought it would take six months for this—ha! Two years later,
and with the help of a lot of people, I’m just about to launch.
Introduction
xx
Third, I realized that MasterList Professional, though a great program,
was never going to sell those million copies and no longer occupied center
stage in my life. It was time to move on from it, from Windows, and from
desktop programming.
Thus I wrote this book. The Web Startup Success Guide is kind of the
Kill Bill Vol. II of what it takes to create a successful startup. I have written
it for all those developers who are ready to step up and create more than
just an alternative to programming for money for someone else. There’s a
whole other story now to be explored and told, one being written by tens
of thousands of developers on the Web, on mobile and social platforms,
even on desktops. Right now it’s a story unfolding in front of a backdrop
of global economic disruption, which paradoxically makes it a great time
for startups—disruption creates opportunity, engenders new needs, and

changes old ideas.
I think this book turned out very well, thanks to the several hundred
people who were kind enough to answer my questions, correct my assump-
tions, and share their experience. I hope you learn as much reading it as I
did writing it, and I look forward to hearing about your startup’s successes in
the days ahead.
1
Introduction: What Was
Is Not What Is
Please Insert Chip into Brain
“Welcome to your startup,” the small grey chip intones. “Before insert-
ing this EasyBrain Start-Your-Own-Startup Module in the USB 5.0 or
greater slot at the base of your skull, the manufacturer has instructed
me to acquaint you with some of the safety features, key differentiators,
and software requirements for your new 21st century startup.”
We’re not there yet, but in this chapter I would like to provide you
with some much-needed Future Shock
1
treatment about realities and the
(mostly online) world your startup is going to face. Understanding and
exploiting the way things work now instead of getting caught up in how
things used to work will make a huge difference in whether creating and
growing your startup turns out to be the dream of your life or a very bad
nightmare.
When I wrote Micro-ISV: From Vision to Reality in 2005, the big news
was how to build a one- or two-person self-funded startup selling software
directly to customers via the Internet. This new economic reality super-
seded the days of shareware and donationware. Google, sites such as
Download.com, and shareware
2

payment processors meant you could sell
desktop software directly to customers without spending millions of dollars
1
Throughout this book you’re going to find veiled and unveiled references to futurist Alvin Toffler’s
books, starting with Future Shock (1970) through Revolutionary Wealth (2006) but especially The
Third Wave (1980). Why? Because, in my opinion, Toffler has consistently done a better job than
anyone else publishing at publically predicting what our society is going to look like. The better handle
you have on the future, the better you’ll be able to live and thrive there.
2
Shareware: Pre-Google 20th century software revenue model for maverick desktop programmers.
Relied on propagating trial, time-limited/crippled/nagging copies via pre-Web forums called BBSs and,
later, portal sites such as Tucows.com and Download.com. If you liked the app, you bought it.
CHAPTER
1
Introduction: What Was Is Not What Is
2
to put cardboard boxes with diskettes or CDs on the shelves of computer
stores such as CompUSA.
What’s Changed Since Micro-iSV: From Vision to Reality
Some of you reading this book may have read my book Micro-ISV: From Vision
to Reality (Apress 2006) and be wondering what’s changed. It’s not so much
what’s changed—just about every section and every link in my first book is
still valid. It’s just that there’s now a whole new layer of opportunity, tools,
and expectations that have taken off: Call it Web 2.0 (or 3.0). Or call it the
Online World, as I do.
What’s changed is that web-based software, including web-centric desktop,
social, and mobile clients, have come into their own. The days of doing it
Microsoft’s way or the highway are long over; so too are the days you could
copy David Heinemeier Hansson’s 10-minute Rails demo, slap some Google
AdWords on it, and sit back and count your money.

The old ways still work—to a lesser degree. But it’s the new ways that startups
can define, deliver, and market their Internet and community-centric value
that are the New Big Thing and what this book explores. You don’t believe
me? Here are a few terms/apps that had not gained the importance they now
have—or didn’t exist—when I wrote my first book.
As I said, things have changed in the software startup world—and those
changes are what we’re going to be covering in this book.
Well, CompUSA’s hundreds of computer stores with boxed software
on shelves are gone; and so too are the days of easy VC money for any four
people with a business plan with the words Web 2.0 or social media in it.
Adobe AIR Microsoft Silverlight
Amazon Web Services Salesforce.com
Apple iPhone StackOverflow.com
Drupal Twitter.com
Facebook Wikipedia.org
Joomla WordPress
Micro VC’s
Introduction: What Was Is Not What Is
3
The New Online Economic Reality
and Your Startup
Things in the world outside IT have changed as well, to put it mildly,
as the global economy, currently officially in recession, lurches through
financial crisis after crisis and the buying habits and attitudes of people
and companies in the developed world are forced to change.
3
We are not going to talk about a lot about the woes and tribulations
of the Offline Economy in this book. First, as Neil Davidson rightly points
out later in this chapter, there’s not much you can do about it. Second,
because if you focus on the things you can do something about, your odds

improve.
If you’re going to win this game called Build a Successful Startup, you
are going to need to get deep into it: live it, breathe it, obsess about it, suck
up every bit of knowledge that can help, Google every question you have.
That means knowing some history about the industry you plan to
take by storm. I know, not as much fun as the latest Rails Envy
4
podcast,
but this is stuff you need to know.
A Ridiculously Short History of Software Startups
For those of you who haven’t been in the industry since day 1, here’s a very
short history of software startups, to provide some perspective on how we
got to where we are. It’s a story of how an industry that got started by accident,
grew to change the world, and continues to evolve today.
In the beginning (pre-1976), software wasn’t something that was sold. As
small communities of computer scientists huddled around dumb terminals
waiting for their punch cards to read and their paper tapes to spool, soft-
ware was just another kind of information to be shared in the academic/
scientific world. Software was sold—but as part of the package of services,
documentation, and, most of all, hardware from IBM and a few other companies.
3
“A horrific holiday season for retailers. . . . Holiday sales fell from 2% to 4% compared to a year ago,
according to SpendingPulse, a division of MasterCard Advisors. Excluding gas and car sales, they
dropped between 5.5% and 8% from Nov. 1 through Dec. 24, as key categories from luxury to elec-
tronics posted double-digit declines. Sales of electronics and appliances fell almost 27%.”—from
“Bankruptcy looms for many retail stores” (AP, January 5, 2009). “Meanwhile, online, while sales were
down for some vendors, 2008 was their best holiday season yet. Amazon lead the way with selling
6.3 million items in one day that were delivered to 210 countries”—from “Amazon.com’s 14th Holiday
Season Is Best Ever.”
4

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