My heart goes out to whoever is writing the blog, “My start-up has 30 days to live”. It’s the truest thing I’ve read about business since Paul Hawken wrote that the reason most small businesses fail is that they have too much money.
It’s funny, because I was on the Forty Women to Watch over Forty list that came out this week as “Gaming the System, by her Bootstraps”.
We did the opposite of a lot of the choices this failed entrepreneur made, in part because this isn’t our first time around the merry-go-round and partly due to that, angel investors weren’t beating down our door. The only one who looks less like the Mark Zuckerberg – Bill Gates – Steve Jobs demographic start-up than me is this guy:
I wrote a post We’re grandparents doing an awesome start-up and Logan’s Run can bite me in which I pointed out that people over 50 may be perfectly poised to be entrepreneurs. Three of our four children have their own careers and are doing quite well. The Spoiled One received a scholarship to La-Di-Da Prep Boarding School (just because she’s spoiled doesn’t mean she isn’t smart).
In short, we were able to bootstrap 7 Generation Games. A big part of the cost is programming and we have two programmers right here. Rather than take angel investor money and hire a programmer or two, we cut out the middle man, did the work ourselves and lived off a combination of retirement income from The Invisible Developer, who had worked things out to retire at 56 (we’re GOOD at math) and whatever statistical consulting I felt like doing.
I received conflicting advice. Some people told me that venture capitalists don’t take bootstrapped companies too seriously. The best advice, though, came from a VC at a Women 2.0 meet-up who told me not to let go of 1% of equity any sooner than I had to. Because it was our own money, we were spending when we hired artists, animators or administrative staff, we made damn sure we needed them. I really watch our budget. When we picked up $21,000 from Kickstarter, some of it was from family and friends and some was from people who I know the $50 they kicked in was hard-earned so I feel a real responsibility to make sure not a dime is wasted. We still don’t rent an office. Mine is downstairs in our house, The Invisible Developer is upstairs (no one sees him).
We applied to one or two accelerators, were not accepted and were told flat out by a couple of venture capitalists that our target market wasn’t big enough. I’m a statistician and it seemed to me that a 50% probability of making $5 million a year was worth more than a 1% chance of making $100 million.
“Cut out that pesky client that generates 80% of your revenue”
That comment from the dying start-up blog sounded familiar. The really lucky thing for us not being part of one of those accelerators is that we went right on doing what we do well – developing games to teach math. We started taking pre-release orders this week. Starting next month, I will be meeting with each of the schools that will receive free licenses. In our Kickstarter campaign, we promised to donate a license for every one purchased. Most of these schools are on or near American Indian reservations, which is where most of our employees live. One grant funding agency called our decision to focus on low-income Native American students “inexplicable” since they weren’t a large enough population to bother with. Fortunately, the USDA disagreed and gave us $99,000 in Small Business Innovation Research grant money.
The same start-up blogger says that he didn’t build his company with generalists, he built it with perfectionists who could build beautiful things. We have perfectionists who can build beautiful things, but they are on contract and paid a set amount per task. They could probably do it better for more money but as I often quote to Darling Daughter Number Three “The Best is the Enemy of the Good”. We have a budget and the people who make beautiful things have to work within it. The people who can do 15 different things are on salary.
My point is not that we are so smart and the man closing down his company is not. Quite the contrary. As I read his posts, at many, many points, I think That could have been us. Maybe if angel investors had been more interested earlier on, before The Invisible Developer turned to me and said,
“You know, I can work on this for free, well, forever”
we would have taken angel funding. I’m not dissing angel investors, by the way. I attended a few Tech Coast Angel events and learned a lot.
What I’ve been reflecting on lately is the fact that because we were an older, atypical start-up, we were passed over by a lot of the fast-track resources.
And that just may have saved us.