A few months ago, I wrote So you have an app idea and want to make a bajillion bucks and since then, barely a day goes by without a few letters from readers asking for more information about going into the software business. For those of you who don't know, I spent about 20 years as a software entrepreneur working for others and building my own companies, so I have a lot of experience in this area I can share with you.
Before we get into the issues of product design or business models, let's talk about the kinds of people who are successful starting a software business. In my experience, there are people with a variety of backgrounds who have made successful software entrepreneurs, and that's because each set of experiences brings something special to the table.
Let's look at a few of those now. When we're done, I'll tell you what background I had that helped me be successful and why that background has also helped as I've moved somewhat away from selling software.
Traditional programmer or developer: This is the most common software founder. If you think about it, those who can code, whether they do it professionally or have learned to program as a side-interest, are the most suited to building software products.
There are some issues and challenges here, though. Many programmers don't like the sales, marketing and "administrivia" sides of the business, and often don't like to involve themselves with customers. Even so, if you're a programmer and developer and have an idea for a product, all you need to do is sit down at your IDE of choice and make it happen.
IT professional: Many IT professionals have some programming experience, if only at the scripting level. Of course, IT folks know all about what it takes to build infrastructure and manage the back-end services of a software business. As more and more software products move off desktops and into the cloud, IT pros become more and more critical as members of the founding team when building a company.
Even so, most IT folks aren't able to build their own code top-to-bottom, so they need to hook up with a developer in order to have a product.
Business development expert: You don't have a product unless you can sell it. If you can't sell it, it's a hobby. Business development people can explore business models, do deals, make sales, establish customer relationships, and get the gears turning on the business side of software.
While business development experts may not be able to build the product themselves, if they can bring a market to the product, the rest becomes a mere matter of programming. But here's the caution: I have met many sales folks and business development people who can talk the talk, but never could actually walk the walk. They could talk up a big game, make lots of promises they themselves believe, but never actually deliver customers.
Whether you're a bizdev expert or you're partnering with one, make sure you can talk with actual prospects before you make too many commitments. Get a feel from people with real budgets about the reality of interest in your product.
Member of the technical trade press: Those of us who write about the software business as a living often spend our days palm-to-forehead wondering what the heck the companies we cover were thinking (and yes, the Ballmer-flavored Redmond does come to mind almost immediately). But many of us also talk to users, customers, analysts, developers and are able to get a very strong feel for what people want and need, and what's missing from the market.
That's why we sometimes see journalists jump either directly to their own companies, or to the marketing and PR sides of software businesses. While most journalists can't code (more's the shame!), having good insight into the needs of the market as a whole, as well as how a wide variety of business models work, can definitely add value.
It's important to note, though, that if coding is not a skill, journalists will often have to build a founding team, including coders and sales pros. Software is often not a go-it-on-your-own business.
Founding team with diverse skills: By far the best way to start a software business is with a team of seasoned pros. If you can gather a team of developers, sales people, marketers, and infrastructure IT builders, you have the makings of a very successful company.
Building a software company requires a wide variety of skills and experience, and a good team combines the best of the best. The challenge: getting everyone to work equally hard, work off the same plan, and get along.
Publisher or distribution channel expert: Those in the sales channel often create their own product. Who hasn't been in a Walgreens and seen house brands of common medications? The same idea is true of those in the publishing and distribution business.
Before I go further on this concept, I have to point out that "the distribution business" for software today is wildly different than what it was a decade ago. There are still major distributors, but they traffic less in boxes with disks than with licensing and management and provisioning services.
Even so, publishers and distribution channels come to the table with what might be the most important resource in a software business: customers. As such, while most publisher and distributors need to rely on product builders (and the teams that can manage and create quality goods), they start out somewhat ahead of the game.
There is a downside though. As I said, distribution is getting slammed on all sides by app stores and software-as-a-service, and by its very nature, the "channel" needs to take its cut of the profits. These days, disintermediation is very easy in software sales and many developers, investors, and customers aren't willing to pay the extra friction costs associated with middlemen.
Technology company: I'm just going to mention this one briefly. Many technology companies build software to support their other products. Existing companies combine the strengths of the founding team along with the distribution channel. The question is whether or not they're moving into a market that they're unfamiliar with and whether they're ready to compete in a new kind of business.
Sugar Daddy with a product need: I'm qualifying what I call as a "Sugar Daddy" differently than, say, a traditional angel investor or entrepreneur. A Sugar Daddy is typically someone with just enough cash to make an investment, but for whom investment isn't a business. Often the Sugar Daddy investor is willing to invest because he or she not only sees a need for a product, but wants the product for himself or herself.
Combining the Sugar Daddy with a developer can be a good combination, but it can also backfire. I actually built a product (a very long time ago) for a Sugar Daddy and I was very glad I turned down "a piece of the pie" and got paid in advance. The Sugar Daddy came to me wanting a specific product, which I built. He was so enamored with designing the product and the packaging, that he forgot about the sales channel. When it came time to sell, he didn't like making sales calls. So...cool product. No sales. I'll talk more about this scenario in a later article. It's a cautionary tale.
Individual with a "can't miss" idea: By far, the largest group of letters I've gotten here on ZDNet were from individuals with incredible, can't miss ideas. Many of them have absolutely no experience. Many of them tell me they also don't have any money. Their idea is to find some developer somewhere, convince him or her to write code, and then post it to an app store and wait for the millions to come rolling in.
Uh. No. I don't want to spoil anyone's dream (although I've certainly been accused of that a lot when it comes to this topic). As this article has shown, you need to bring something strong to the table before you can get into this business. Don't despair, though. Over the next few articles, we'll talk about what you can do to build up your strengths so that you can bring something to the table.
At the beginning of this, I told you'd I'd share with you the background I brought to the table when I started my first software company at age 26, back in the dark ages of the 1980s.
I had a degree in computer science and had built actual full systems, so that checked off the programmer/developer box. I had worked for Creative Computing and Ziff Davis both as an IT guy and an editor, so that checked off both the IT and trade press boxes. Creative also had a software publishing arm and I was involved with some of that as well, which helped me check off the distribution channel experience box. And I'd spent four years at a venture funded startup doing product management and business development, so that checked off the business development and deal-making skills box.
In short, I was ideally suited to start a software business. And yet, even so, it was hard going at first and until I built up my original 13-person team, it was a challenge to make into a success. Your team is very important and while it's possible to be a one-man or woman software entrepreneur, you better have a wide range of the necessary skills going into the game.
The software business can be a joy and a very profitable venture, but it will always be a reflection of what you and your founding team bring to the business.