Update: I’ve added a few more web apps to the list at the end.
My last post on Web Mission stirred up a lot of discussion so I’d like to expand on my original thoughts.
My main point was not that going to Silicon Valley to build relationships is a waste of time or money. Everybody knows that making friends and nurturing connections is of the utmost importance and I’m 100% supportive of that.
Also, if anyone is participating in Web Mission because they’re trying to establish a specific relationship with someone in the USA – more power to them.
So what’s the problem?
Getting the message right
What bothers me about Web Mission is that it sends out this message:
“Web apps need to emulate the Silicon Valley model: Funding, quick growth and exit by acquisition or IPO.”
I disagree. And I also don’t think that that’s the message we should be sending out to the UK Web industry.
David Heinemeier Hansson doesn’t agreed either and makes the point in his post Are you sure you want to be in San Francisco? I think this quote is particularly relevant:
“It [being in Silicon Valley] takes away much of the urgency to make money that I think is critical to build sustainable businesses. It gives you too many resources to be satisfied building simple tools for niche markets. Everything becomes about catching that huge wave.”
There’s glory, money and fame to be made in California but the problem is that only a tiny percentage of web apps will ever find it.
More of us should be focusing on building simple, focused, small-team web apps that meet everyday needs. Am I saying we should kill our dreams of changing the world? No. But we all need to admit that YouTube, Facebook, Bebo, Google and Twitter just aren’t the norm.
Instead of desperately trying to create the next phenomenon, which is highly unlikely, why not aim for something that’s definitely achievable?
If you have a team of two or three and you bring in $1M in revenue per year, I’m guessing you’ll be pretty damn happy with your earnings. And to do that, all you need to achieve is 2000+ accounts at $40 per month. With those kind of numbers, you just don’t need mass adoption.
We’ve done it. So can you.
As I’ve said before, we spent $45,000 on building DropSend. It now brings in profits of over $200,000 per year, and we don’t even have someone working full time on it.*
YouSendIt, our biggest competitor, has raised at least $10 million in funding. I don’t know how big their team is, but I’m willing to bet it’s at least 20 people. So immediately, they’ve created a huge amount of pressure on themselves to generate large revenues. With all that funding and all those mouths to feed, it’s a completely different game.
Could they crush us because they’re throwing more money at the problem? Possibly. But we’re more agile and can react much quicker. Even if they squeeze us out of the market someday, we can easily launch another niche-market web app and quickly become profitable.
I’ve got nothing against taking big risks and betting big, but sometimes it just doesn’t make sense. We’re currently enjoying a lot of profit from DropSend for almost zero risk or stress. Which model is better?
Too simple?
I can see the comments already: “Ryan, you’re naive. It’s not that simple.” Well, maybe not all of the time, but you know what, most of the time, it is that simple. Build your app on a smaller budget, with a smaller team, focusing on a smaller niche, and you’ll be profitable much more quickly.
With the advent of cloud computing and storage, it’s much easier to build more than one app with a small team. If you build three applications and two of them are mildly successful, you’ve got a great business on your hands.
There’s just no need for being TechCrunched and trying to reach the mass market.
I’m sure someone will say in the comments: “But Ryan, you’re an edge case. You’ve become friends with some of the big names in the Valley and that’s why DropSend is successful – you’ve received a ton of exposure.”
Here’s my answer: 99% of our paying customers have never heard of Web 2.0, TechCrunch or any of our events. They’ve just googled ‘Send large files’ or someone has sent them a file via DropSend so they decided to give it a try.
The bigger question
The real issue I’m getting at here is this: What does it take to make you happy?
Money is important to being happy, I’ll admit that. You need enough cash to live comfortably and feel secure. However, I think it’s dangerous to assume that your company needs to bring in a huge amount of revenue in order for you to live the good life.
Take a minute and do a little exercise with me. Imagine logging into your online banking and seeing a deposit of $10 million – right after you’ve been acquired or sold all your shares.
How do you feel? What would you do with the money? Buy your dream house? Pay off your debts? Get that Audi R8 you’ve been dreaming about? Send your kids to private school?
OK, now imagine you’ve done the things on your list. How do you feel. Any happier? I’d be willing to bet that you won’t actually feel much happier than you do now. You might feel nice for about two months, and then you’ll be itching to do something else.
Happiness isn’t found in being the next company to sell for $100 million. So that’s the whole point – you can have a small web app business and still enjoy the good life.
No Silicon Valley needed.
They’ve done it too
Here’s a list of great web apps that are small, successful, profitable and happy – all without emulating the Silicon Valley model:
BlinkSale
37signals
FreshBooks
WeLoveLocal
Flexiscale
Remember the Milk
Fogbugz (from Joel)
Campaign Monitor
Nozbe
ActiveCollab
There are a ton more, obviously. Please add them in the comments and I’ll update the post.
- * I plan on changing this as soon as I get off paternity leave, I’ll be going back to work full time on Carsonified’s web apps. We’re hiring a full-time developer and we’re hoping to start on our third web app quite soon.