Boom 2.0
VC funding. It’s something that you read about almost daily on someone’s site. Every new venture seems to be getting money pumped into it and you can only imagine how much easier that makes their lives right? Well that’s what I thought until it happened to us.
Last week we were offered a “generous” sum of money to fund some of the projects that we wished to work on. Initially, we jumped all over the offer for the simple reason that we continue to tell ourselves that if we could get away from doing client work for a couple of weeks/months then we could dedicate 100% of our time to the stuff we really want to do. After some time though and a lot of discussion we decided to turn down the money mainly because the offer didn’t feel right to us. I wish I could say it was an easy decision to make.
I admit to being very proud of what we have accomplished with the 9rules Network in just under five months, but also realize that it is just a small step to where we plan on taking our company. I am also very pleased to see the work we are doing at Business Logs and glad to say that we are overloaded with client work. But again that is only a step in the direction we wish to take.
If we wanted to do client work for the rest of our lives then the situation we have at Business Logs would be the perfect scenario, but we wish to make our own little mark on the web just like every other startup. However, we seem to have encountered a problem that no other person in the world has encountered: we need money for survival. I know, I know this is insane, but for us this is the case and therefore we continue doing client work with the ability to make some small dents in our projects while also running the Network.
37signals talks about how bad VC funding is and the fact that it is anti-Web 2.0. Well Scrivs talks about how they have been one of the most successful design firms in the world since 1999 so they had a bit of time to save up some money and hire David to code Basecamp for them. Well then you should’ve started with a project that was going to bring in instant revenue before you worked on the Network says the audience.
In time hopefully everyone will understand why we started with the Network and why we have made it our core. In our eyes, it just made sense.
Do You Want To Be Funded?
It would be nice to know where your paycheck is coming from, but it isn’t so nice to have that added bit of pressure and departing with a share of your company. However, as my good friend Mike Davidson likes to say:
Better to own 75% of $1M than 100% of $0.
And wait till you see what his new company is coming up with…hotness x Web 2.0
Before last week I thought if we ever got an offer for funding I would take it no matter how ridiculous it was simply because it would free up a lot of time to devote our resources to secret projects #1-85. But that wasn’t the case and believe me its not easy walking away from six digits. Now we just know that if we do take any funding it will have to be an offer we are comfortable with and not just one that allows us to work on what we want to work on.
Are You Looking For Funding?
Like the question above the answer is yes and no. We are not actively seeking out VCs to talk to, but we definitely won’t turn our backs if any wish to speak with us. We can continue to move along doing what we do, but probably not at the pace we would like. We don’t need funding, but we do want more time away from client work.
Don’t take this entry as an excuse for not getting things done. On the contrary, it probably has more to do with our inability to turn clients away. It’s tough to walk away from the new challenges presented to us daily. With that said we have decided to devote small periods of time to what I call Quick Hit projects. What are they? Nothing special. Just offering services that are already available, but just doing them a little bit better. A little bit more our way.
Finally, let me offer this piece of advice to all the CEOs of young startups out there. I know how it feels to be responsible for a team of individuals that look for you to guide them and help them reach that big payday, but if a VC comes with an offer and it just doesn’t feel right to you, then just walk away. There will be more down the road.
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What you’ve created with 9rules is more important than anything 37signals have done to date – and it’s only going to get better – with or without funding.
There are so many points to consider when toying with the idea of funding – VC or otherwise. It’s ridiculous to make a blanket statement calling funding anti-Web 2.0. In fact, it’s just plain wrong. Some of the biggest players in the industry were backed by huge amounts of VC funding, and I am sure I don’t hear people claiming that they aren’t ‘Web 2.0′ enough.
A little off topic perhaps, but comments such as that are really starting to irritate me. No one can definitively say what is going to happen in this industry. Really talented people are working on things that will blow your fucking mind – saying this or that isn’t ‘Web 2.0′ is just crap.
Kudos to you for at least staying level headed. In the long run it’ll be guys like yourself that don’t end up broke, Web 2.0 or not.
By Jake Tracey on October 3, 2005 3:22 am
“What you’ve created with 9rules is more important than anything 37signals have done to date – and it’s only going to get better – with or without funding.”
What is that, exactly? I’m not trolling, I genuinely do not know. Please do tell.
By Tomas Jogin on October 3, 2005 4:33 am
Paul is in a position to easily market any product he chooses to create via the 9rules members. Of course, no one is obligated to publicize the release of a product, but I’m sure that many will do it because of the time and effort he puts into fostering the community around 9rules.
Aside from marketing, he’s also developed a network of talented designers, coders and entreupreuners that he can tap into at basically any time – not because he’s paying them, but because they’re part of the community he has created.
Community is much more important than the applications that 37signals produce, no matter how you look at it. Because they rely on the popularity of their products to be successful, the onus is on them to create new, cutting edge software because that is the benchmark they’ve set for themselves. Personally, I don’t think they’ve followed through very well with Writeboard.
By Jake Tracey on October 3, 2005 4:40 am
Jake: So, a community of blogs and designers that may or may not hype his products; but which he can hire to work for him. Amazing.
The only things 37 Signals has done, to date, is to launch several wildly successful products; they’re creating and leading functional and aesthetic design trends as we speak; and, with their creation Ruby on Rails, they’ve pretty much kickstarted a web development revolution.
By Tomas Jogin on October 3, 2005 5:48 am
Clarification: I didn’t mean to belittle 9rules, I like the network and I read many of the blogs, I just think the comparison to 37 Signals is dumb (not only because it’s apples vs oranges).
By Tomas Jogin on October 3, 2005 5:54 am
Scrivs,
I’m not sure why you feel that ‘client work’ is the only option for brining in cash. When I was lead web developer at a design studio in London, I quickly realised that building websites is about the worst possible way to make a living: tons of work, cranky clients, low pay, one-time fees. No thanks.
You’re a smart guy and I’m sure you can come up with something clever that will give you just enough cash to pay the bills, whilst giving you time to work on the things you’re most excited about. You don’t need very much cash these days (as you know) to start something new.
I’m almost finished with the book ‘boo hoo’ (the story about the rise and fall of boo.com). It has cemented in my mind that in this day and age, with cheap hardware and scores of knowledgeable talented designers/developers, there is rarely (notice I didn’t say ‘never’) a reason why someone would need to take on VC to make their ideas come to fruition.
- Ryan
By Ryan Carson on October 3, 2005 6:54 am
Ryan,
Client work is definitely not the only way to bring in cash as I have been bringing in cash by other means for the last 18 months. We are working on other means to generate revenue for the company without client work, it just took a second or two to get things off the ground.
Jake: Thanks for the compliment.
By Scrivs on October 3, 2005 9:10 am
Interesting article. It describes a lot of issues I’ve been thinking about lately as well. I agree on the fact that this whole this-and-that isn’t Web 2.0 or the other way around is quite irritating. I guess no one really knows what Web 2.0 really is because everyone seems to feel the urgent need to make his/her own definition of it.
I guess it’s better to just go for innovation and using interesting new techniques and strategies, whether they’re ‘Web 2.0′ in some blog owner’s book or not.
At least you guys are pretty inspiring so keep up the good work!
By Marco on October 3, 2005 11:06 am
Inspiring? Us? Well thanks Marco, it’s more like we get inspiration from everyone else, so in a weird way we are plagiarizing other inspiration to make it seem like our own inspiration and therefore having you get inspiration from us instead of the people we receive it form. Make sense? Good.
By Scrivs on October 3, 2005 11:13 am
scrivs, can you put something that says who authored the post? With your new multiple author community approach, adding an author would be useful.
By Brian Breslin on October 3, 2005 11:46 am
But I’m the only that writes for Whitespace. If there comes a time when others begin to write on it then I will definitely include author’s names.
By Scrivs on October 3, 2005 11:52 am
scrivs, i wasn’t sure if you’d hired on people for whitespace, now i get it.
By Brian Breslin on October 3, 2005 12:31 pm
Brian: that’s the point of 9rules – you get to keep your blog, AND make it better =) Whitespace is cool cause Scrivs hasn’t paid any clones or robots to write for him yet.
Nice to know that 9rules is starting to see some action on the VC and even nicer to know that 9r is playing the money game SMART.
=)
By Daniel Nicolas on October 3, 2005 2:45 pm
Scrivs> I see your point but I compare it to a great (project) manager. Great managers do very little of the ‘actual work’ but yet they make a huge difference. They can be visionnaires and inspire the individual team members to do great things. I am inspired by what you guys are doing to set up a succesfull business, that was the point I was trying to make :)
By Marco on October 3, 2005 4:57 pm
Congratulations on attracting a VC without requesting one, sorry it didn’t work out for you, that happens sometimes.
As for ‘Web 2.0′, in my opinion it has become a null word. Everyone “knows” what it means except that it means something different to everyone with the end result that it means nothing and is just more empty marketing technobabble.
Keep up the good work and I’m certain things will work out as you wish.
Oh, and if you see anymore VC’s with 6 figures worth they want to give away send them over my way :-)
By WD Milner on October 3, 2005 5:46 pm
I’ll make sure to keep a look out Wilson.
Marco: Thanks for the compliment. I will have to relay that to my team so they can start thinking that I actually do some work around here.
By Scrivs on October 3, 2005 7:49 pm
I wish you the best of luck my friend. You have built, if nothing else, a great “media” brand that let’s me know (once I see the logo) that I won’t be subjected to “a lot” of bs and sales pitches. If getting and keeping attention is valuable, then you have managed to increase that value in a short period of time. Boom…yes. But it seems diffrent this time around. There seems to be entirely too many people playing in the same “space”. Hell even the dot com era had some variation. Many of the services I am seeing poping up are fighting for the very same set of customers. I was told when I started in banking (many moon’s ago), you are ready for VC dollars when you know you don’t need it to survive.
By Solomon Folks on October 3, 2005 8:04 pm
Enjoying your Monday better now? ;-)
By Jeremy Wright on October 3, 2005 9:48 pm
I started enjoying it the second I woke up. Nobody even notices all the other commotion that happened since that is our own little niche.
By Scrivs on October 3, 2005 10:31 pm
Scrivs – 75% of a mil still means that someone else who wasn’t always there, who mightn’t even understand what it’s all about has 25% and will be messing with you one way or another. You did the right thing. You’ll get another offer when you’re at a point when, whatever the %, you’ll still call all the shots. Yeah, it’s a good thing.
By anon on October 4, 2005 9:25 pm
In all the noise about the SVN comparison I would just like to say thanks for the solid advice about VC funding. It’s nice to see people who are still considering the as a means to acomplish what they want instead of walking down the same road just because everyone else is saying it’s the better road.
By Wesley Walser on October 5, 2005 4:48 pm
Your insights has been very usefull for a costarrican leading an small Tech company with plan for developing new ventures.
Keep up the great job of 9 rules, and don’t forget the spanish speaking audience of your site that would be glad to see a version.
By Heriberto Rodriguez on October 5, 2005 9:00 pm
No worries, Heriberto, the Spanish version is coming very, very soon.
By Scrivs on October 5, 2005 9:02 pm
When we considered VC money vs going public in some form, my partner came up with a very good reason against VC.
“I don’t want some guy calling me at 2am wondering about where the return on his money is”
VC money, while great in some cases, brings Big Brother into the picture, and for people that are inside and out entrepreneurs, answering to somebody else is a tough hurdle.
By Guido on October 6, 2005 10:30 am
“Better to own 75% of $1M than 100% of $0.”
That’s a very true statement.
I was recently approached to buy my marketing company – not for a cash sum, but instead for “equity” in a company that hadn’t floated.
Not exactly a deal worth chasing.
By Brian Turner on October 12, 2005 6:26 am
“Web 2.0″ is a term that does serve a purpose. It’s more about the Web industry, for lack of a better term, than anything else. In other words, it’s self describing and unfortunately, self defeating.
The choice to use a term that suggests another hype or repeat of one of the primary forces that nearly toppled our industry just a few years ago, is truly horrible.
Software has versions, Human Beings do not. (o.k., we do have offspring that are sometimes labeled “Jr” but it isn’t the same thing-nice try though.)
We work in a field that is based in technology yet requires skills and knowledge about how people communicate (to each other, not just to a machine).
So, that’s the bad news: we still suck at communication, especially when communicating to the rest of the world. “Web Standards” now has some real competition in this category.
But, there’s good news as well-very good news, I believe. We are finally starting to “get” that the Web is a social tool. To improve it’s usefulness, we must look at the bigger picture; that is, looking at context. We are starting to ask “why?” in addition to “how?”
This is how we remain relevant and useful in the long run, despite our self destructive efforts to bring about “Meltdown 2.0″
By Michael Almond on November 10, 2005 2:58 am