Times Have Changed: Do You Really Need VCs to Launch A Startup?

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Gal Josefsberg is the VP of Product Development at SocialChorus and instructor at GA in San Francisco. In this blog, Gal describes the changes in fundraising needs throughout the years and how you can get your startup off the ground without VC buy-in.

Back In My Day…

I started my career in 1997.  Back then, the internet boom was just starting out and companies were launching into insane valuations over night.  It seemed like everyone was putting together a new site and then going IPO for hundreds of millions of dollars.  Of course, we all know how that ended.  The bubble burst and websites like eToys, pets.com and others lost their insane valuations just as fast as they earned them.  However, what few people remember about that age is that simple sites (and they were very simple back then) like eToys and pets.com needed millions of dollars to get off the ground.

Technology was not an easy thing back then.  To build a site, you needed a team of engineers building proprietary code and a data center of your own to run it.  Everything had to be built from scratch and no one knew quite what they were building.  That means every single piece of code was built by your team and then maintained and supported by that same team.  There was no other way but it was also a bit insane.  The analogy in the car industry, for example, would be if every would-be car manufacturer needed to reinvent the wheel and the internal combustion engine from scratch before they could actually design their car.

You Kids Have It Easy…

Now, fast forward a few years, to the late aughts (zeros? What the heck are we calling the last decade anyway?) Only a few years have completely changed the nature of tech startups.  Got a brilliant idea?  You no longer need millions from a VC, you just need a few weeks of dev time and off you go.  Not a dev?  No problem, there are plenty of devs out there looking for contract work or interested in partnering with someone who has a good idea.  Not looking for a partner?  No problem, you can learn to code in just a few week or use off the shelf components to create a beautiful site from scratch. Which is what I found myself doing late one night.

Flashback Time!

Actually, before we get to that part, let me backtrack a minute.  Back in 2010, I was working for a software company called Baynote.  Baynote provided recommendation software for companies with a website.  This software was responsible for the “people who bought this also bought that”-type recommendations you see on most eCommerce sites.  At the time, Baynote was considering a few new directions for the product and one of the ideas I came up with was a strong curative voice.  That is, instead of just saying “people who bought this bought that,” a strong curative recommendation would say, “Here’s a recommendation for someone just like you and here’s a review of it and a few reasons why you should buy it.”  Baynote didn’t want to go with the idea but I really thought it had legs.  So rather than discard it (or try to raise 10 million dollars to build a company around it) I decided to see what I could do with just minimal resources.

80’s Style Training Montage Time

That night I registered a domain ($20), installed WordPress (free), found a theme that was suitable for an eCommerce site ($50), added a couple of plug ins to enable social integration and search engines (free), created an Amazon associates account (free), sourced reviews through friends and family (free although this would later end up costing around $500) and launched the site.

Think about this for a second.  I built an eCommerce site from the ground up for under $1000.  Now I’m guessing you’re saying to yourself “pshaw!  He didn’t build an eCommerce site, he built a fancy blog”.  Ok, interesting assertion.  Two responses to that.  First, I could have just as easily said “I built a really fancy media site for under $1000” and this article would have been just as awesome because media sites took just as much as eCommerce sites to build back in the day.  However, my real response to this is “I build a site that sold things on the internet.”  That’s an eCommerce site.  In fact, I built a site that sold $754 worth of stuff the first week it was up.  So much for a fancy blog…

Still, I wasn’t quite happy with the front page of the site, so I spent around $200 for a better one.  I also added a couple of designs, a stock photo or two and voila, Diamonds or Dogs was born.  Total cost was around $1000.  Total time spent was around 10 hours.  Sales the first month were around $1000.

So what’s the lesson in all this?

The lesson is that whatever startup idea you have in your head today, it’s a lot easier to start it than you think.  In fact, the first step, getting things up and running is easier now than it has ever been.  That’s not to say that startups are easy, they’re not, it’s just that the hard part now comes later, when you need to differentiate your product, build a customer base, figure out marketing and sales, deal with your infrastructure and so on.  Getting things built is easy.  I don’t ever want to hear people complain about “I have this great idea but I  don’t know how to get it built.”  You can get it built.  It will take some time and you’ll need to use Google a lot to search for answers but the technology is no longer the barrier, so stop using it as an excuse.

So What Happened To DoD?

I eventually went on to shut Diamonds or Dogs down, primarily because I found that I simply didn’t have the time to devote to it and I had another startup idea in mind (It was an iPhone messaging app that I managed to have built for under $5000 and it tanked before it even got to the app store but that’s another story).  Still, every once in a while I look back at this site and think about reviving it.  I have a few ideas you see, and I’m sure I could have them implemented for under $500…

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