Quite a number of us (I guess) have the dream of an own software company. Me too, although I'm not sure, if this dream does not clash with my lovely family ...
But what are the most important prerequisites for a startup? I'm sure some of you already founded a company and have some useful hints.
Having something that someone else will pay you money for.
This isn't me being facetious. Too many companies start without a clear idea of how to make money - even if that's just money to pay your salary and for that funky chair that you've got your eye on.
My startup had a great idea. We knew it was a great idea. The people we pitched it to agreed. We did not, though, have a great idea of how to sell it to them. They had some really good ideas about how we might give them the use of it, but the necessary expenses fell in the middle ...
I would say a very good idea would be the most important thing, and a very good understanding of your market you are going into.
Listen to Stanford University's ETL podcast series for a great understanding on tech start ups. You will hear from some of the biggest names in the business with an unbelievable wealth of information. The sing;e greatest place I have found for fostering your entrepreneurial spirit.
Work for a lot of different places -- find out the best and worst qualities of managers, programmers, and procedures (you'd be amazed at how much good sysadmins can be worth!). Take the best ones, discard the rest, and good luck! :)
It's only one thing, but something very important that I think some people try to get away without... especially if they're bootstrapping... is a real, honest, business plan. Even if you aren't gunning for a small business loan or other external funding, you absolutely have to have, in writing, what it is your company is going to do and how it is going to do it.
Even if you're extending a hobby or side work into something more primary, and therefore "know what you do," put it on paper. Really.
Patience.
Passion.
Financial means to support your operation for 18 months.
The ability to listen to customer and figure out what they want and need.
The ability to sell. (sell one, repeat)
The support of your wife.
And finally, knowing enough technical stuff to create good software that runs on user machines without hand-holding.
Things to consider:
My recommendation is, as Steve mentions, to first create a real buisiness plan, in writing. Make sure that sales forecasts are realistic, if not pessimistic. Just preparing it will help you think of all that you're not thinking of now (and trust me, you'll still miss a lot of things).
Then research all the nuts and bolts of it - incorporation, zoning, tax implications, insurance. Determine the costs for that and a plan to execute them. Nothing like having to go spend an unbillable hour at the accountant's office or an unbillable day at the local municipal building getting permits early on when you need to be generating billable hours to generate income.
The process is risky, scary and well worth it even it it doesn't work out on your first attempt.
Added note based on a comment:
Some may feel that in today's age a business plan is unnecessary. I disagree. I'm not saying it needs to be in some standard format that a business school or investor would want, but the process of actually creating and writing it down forces you to deliberately think of things that you need to do. It makes you organize your thoughts and to actually make projections rather that just say to yourself "sure, I can sell $100k worth of my product." It makes you think about when you'll realistically sell them and to whom.
Trust me, you won't cover everything when you create it, but you'll be glad you at least have the larger points thought out and down when you have to start allocating your own time and money to get things done.
Have something people will pay for!
Don't do it by yourself. In the likely of cases, you will need to have one or 2 more partners in this venture. Sign someone else up who you will need to give 45% of the company too.
Beyond some of the other things that people already posted, I recommend the following:
Also, just our of curiosity... How many of those posting answers to this question have been involved with getting a startup off the ground??
Every company needs a goal, and your end target will determine what you do with the rest of your time. Bill Gates wanted a computer on every desk, and eventually managed it. Stack Overflow wants to be the definitive resource for programming questions and answers.
If you really want to start up your own company there is no better time than now. Despite the economic outlook being somewhat bleak software is still requires for many businesses. Write a bullet-proof Business Plan and Cash Flow Projection and get others to scrutinise you on every single point you make. Revise every point until your goals are set in stone, then start your company.
You very rarely get more than one chance to do these kinds of things, so if you really want to do it and believe that you can, go for it.
Alongside some of the other good advice here, a couple of things to consider:
Decide what it is you want out of starting a company. Do you want to grow it into a reasonable size business or is it more of a lifestyle choice to do with taking control of your own destiny and keeping focused on things you love doing? There's no right or wrong answer to this, but a lot of people don't give enough consideration up front to what it is they want from starting their own business.
If you do want grow it into a larger business, are you prepared to give up being a developer and become an entrepreneur? Beyond a certain early stage when you're likely to be hands-on, you simply won't have any time for coding if you're serious about growing a business. You'll be selling the company or its products to prospective clients and investors, hiring people, managing people, dealing with all the usual business and financial issues etc.
Having started a number of businesses (some successful, some less so), both solo and with partners, I can vouch from personal experience for the shock that can hit some people as they come to realise that their dreams of coding cool stuff with a bunch of fellow enthusiasts just aren't going to pan out if the business is successful.
If you're not prepared to give up the coding to be a business person, you might want to think carefully about partnering with people who have complementary skills and interests but are more focused on the business side of things. This may give you some scope to keep on the technical side for longer although at the risk of having other people driving your business forward.
Choose your new company name carefully. The last thing you want to do is have to spend all your time on SEO because your company name falls under a high contested literal keyword.
You definately need a business plan, otherwise you won't be able to get any bank loan.. Unless of course if you have money to burn, and don't need a bank loan...
I would say, just create a company consisting just yourself... Keep your current job, and take small side projects from connections you've built... If things goes badly, you still have that income from your job. On the other hand, if things goes well, resign from your job to focus more on your company.. Just my 2 cents.
Cheers,
RWendi
Most of the above comments are good - I would entirely agree with having some kind of business plan, and some good idea of who will buy your services (which is really part and parcel of your business plan, anyway).
But I'll add that;
You have got to want it. Really badly. Because if you don't, the first major setback will blow you out completely. You really have to want to do it, and be determined to keep going, and not get discouraged when things don't go your way.
And in answer to @Chris Pietschmann's very relevant question - I have my own 'startup', I started at the turn of the millennium, I grew to having a few people work for me, and when the world changed a little I scaled it back a bit. These days it's mostly me, with some help from a subcontractor now and then, and even now every single day brings some kind of challenge.
It can be very exciting, very rewarding, and deeply frustrating. I think you need to be the sort of 'even-keel' person who can take the highs with the lows.
From my perspective as the founder of a software consultancy which is growing organically, is 100% founder-owned, with no loans or VC.
At any point in your business, there will be one figure at the back of your mind. If we get no more sales, how many months is it till we go bust? It's a bit like burn rate, only tied to the amount of cash/liabilities you have.
I can’t actually give any advice that would be backed by experience, here are just some articles that I find reasonable:
Some recommended reading in a book form Eric Sink on the Business of Software
Or
You can find the original version of the content that was the base for his book on his blog http://www.ericsink.com/bos/Business_of_Software.html
Also Eric Sink coined term Micro-ISV
I started 2.5 yrs ago. It really depends on what you want to do. I started as software development shop, I work from home, I have very nice home-office and that is it. I didn't save on equipment and don't quite understand how you will save if you host with godaddy ?! Don't waste your time with silliness, see how much something costs and buy it if you really need it. I didn't buy $4000 machines, but did have PC with two monitors and 24" iMac ($2000 at the time) for my wife who is a partner. Plus we have local HP server that offloads a lot of stuff from our workstations and I can always take laptop to work which we also bought as well as projector and several other gadgets.
Even though I would recommend creating business plan, I didn't have very detailed one, except that I said that I will work on development in .Net, Rails, Cold Fusion and PHP. I also didn't have much money saved. I got my first client in 3 months to do $400 worth of work. After that things slowly picked up. Then after a year and a half I had to fire 2/3 of the clients because I realized that with them I can't grow.
I think I did quite a lot of mistakes, yet as someone mentioned, this is what I really wanted and I never considered to back down, just thought about how to overcome difficulties.
One thing I really wanted to do is my own projects and this never really picked up. I also had employees and contractors in the past but that didn't work out long term (one at the time). One of the long term contributions of one of my contractors is code so bad that this client is permanently tied to me :). I was expecting my son at the time and didn't have much time to review it.
Hope you will find this useful.
One thing I haven't seen articulated in the comments here is that there is a big difference between starting a consulting firm and what we call "start-ups".
A consulting firm has very little risk compared to a "start-up". With a consulting firm, you either find clients or you don't. Ideally you should know who your first 2-4 clients are before quitting your job. Probably 6-12 months of living expenses is enough. Taking loans for this is fairly low risk. You won't get equity-based investment from a VC or angel for this.
A start-up is a company that sells a product (though the product could be deployed as a service "subscription"), and it takes time to build that product. For a start-up, you need the funds to make it through development of the product AND selling the product enough to have revenue. A start-up is a much longer process and much higher risk. I would say if you're not doing outside funding, you need 2-3 years of savings plus business costs. If you are doing outside funding, beware that fundraising is VERY distracting and if you don't have good pitching results, it can be very demotivating too.
I have done the start-up scene with and without VC money, through IPO, and through disasters. There's pros and cons to all of it. As other have said, it's imperative that you are building something people will pay for.
What I do is make a datasheet of the product under consideration and then I go out and talk to customers. If they say "this sounds good" it's NOT good enough. They have to say "When can I buy this?? I NEED THIS NOW" for you to know you have something worthwhile. Otherwise, they are just being nice.
And of course, as others have said: * If you have family, they have to be on board too. * You have to want it really bad. If you are doing things right, something will go wrong every day. There will be a new problem, a new issue, every single day. Perhaps one a week that could destroy everything. A new competitor, a serious bug, a fundamental flaw, a leaving co-founder, an investment that falls through, the economy with your funds in the market collapsing :-), a lost customer, a disappointed analyst. You have to be able to slog through it. * Don't do it alone, but also do not bring in other people who do not want it badly. Get a lawyer to set up things correctly and do not let it be the case that a co-founder who leaves gets too much stock.
Good luck!