The most unambitious way to build a startup
How to minimize the risk of startup failure
We know the statistic: “90% of startups fail, and only 1% will ever become a unicorn (>$1Billion)”. Well, yes, but you don’t have to play this game.
Here’s a practical guide for playing a different game.
It has helped me to minimize the risk of startup failure and to pick winning ideas to work on.
There’s a catch: If you want to build rocketships, fight climate change, or become the next Steve Jobs, this approach will sound ridiculously unambitious to you.
If you want to build a sustainable and profitable business that gives you the freedom to do whatever you want in life, this might be an interesting read.
Here we go.
Which game are we playing?
Don’t get me wrong. I admire people who think bigger and aim higher. They are, by all means, braver than me. Also, we need them. We need people to work on big, big ideas. These are the ones that move the world forward.
“The ones that are crazy enough to think they can change the world are the ones who do.” - We all know who said this
This article, however, is not about the people changing the world. It's about the people wanting to change their own world.
At one point in my life, I thought I was one of those crazy people (who didn’t?). But for every god-tier founder like Steve Jobs, thousands or millions fail to “change the world.”
For every unicorn (company worth $1B), at least 99 other startups failed. This is still the only game in Silicon Valley: Go big (unicorn) or go home.
However, “The Silicon Valley Game” isn’t the only way to play startup games.
I decided to play another game: Creating small but profitable companies without funding that let me do whatever I want with life.
Let’s call it “The Bootstrapped Game”.
Playing this game won’t suddenly lead to immediate success without hard work, long hours, sacrifices, and struggles. No, that stays the same. The definition of winning is different.
Winning “The Silicon Valley Game” means building a billion-dollar company. Winning “The Bootstrapped Game” means building a profitable business on your own terms.
This sounds (and is) more achievable. You might not change the world, but it will change your life.
When you decide to play “The Bootstrapped Game,” there is still a big chance of failure. I’ve seen many exceptionally talented people working on the wrong ideas for too long. No validation. No market. No customers that want to pay.
“Pick an idea that people already want.” - Paul Graham with a touch of me
Here is how I pick those ideas and minimize the chance of failure.
How to consistently pick winning ideas
I created a framework to help pick the right ideas. There is still a big touch of luck, hard work, and sacrifice required to make it work. However, by following these four rules, I’m certain you will minimize the risk of failure.
Here are the four rules:
1) Is it B2B?
That’s where the money is.
B2C apps are playing the startup game on hard mode. Sure, go ahead and build your B2C app. Monetization will be 10x harder than B2B.
As a consumer, paying $10/month for your app isn’t likely. You need to build an insanely helpful product. Only Netflix and Spotify manage to do this.
On the other hand, paying $100 per month from our company account is just a minor bookkeeping blip. B2B = money.
2) Is there a competitor out there making bank?
If yes, that’s a good thing.
Competition usually indicates there is a market. Now, the validation phase becomes a lot easier.
You’ll still need to talk with your users and ensure you build something they pay for. However, having a successful competitor is a great sign of a market willing to buy your product.
3) Is there one angle to outcompete your competitor?
When I tell you to look for a market with competitors, I don’t mean you should copy what they do. Please don’t. This won’t work. You need to find your own angle.
Ask yourself the question: Is there a single thing you could outcompete them on? Design, speed, customer support, price, features, etc. Just one to fight you into that market.
If you are better at just one tiny thing, I promise there will be a niche of customers who value that one thing. Those are your target customers.
4) Are there any SEO opportunities?
Let’s say you ticked the first three boxes. You figured out where the money is, that there is a market, and that you can provide a better solution (from at least one angle). Now, how will you get traction?
To sell, customers must find you. I wrote about the many tactics we used to get our first clients, but ultimately, you want a scalable growth channel.
This could be anything from partnerships to paid aids to SEO. However, for most bootstrapped SaaS companies, SEO is still king (no, it’s not dead).
This would be my last check. What is the SEO playing field like? Can we rank quickly with a new domain?
Applying these four rules will minimize the risk of working on the wrong ideas. However, you also refrain from building something outlandish with outsized returns, but you knew when you decided to ditch “the Silicon Valley” game.
How to put this into practice
Let’s walk the talk.
Last year, I co-founded UniHosted with Dries.
For a long time, Dries has been experimenting with hosting UniFi Controllers (his 2017 summer project). His idea was to build a managed hosting solution.
I knew nothing (and still don’t) about hosting, servers, or UniFi Controllers, so I used the framework to evaluate whether UniHosted was a winning idea.
1) Is it B2B?
Yes. Our customers are IT service providers that want to outsource their hosting responsibilities. Sounds like B2B to me ✅
2) Is there a competitor doing well?
Yes, a few companies already entered the space. Great, there’s a market ✅
3) Is there an angle to outcompete?
Doing some market research, I quickly discovered that our competitors were either super expensive, lacked important features, or had no support. There was my angle ✅
4) Are there any SEO opportunities?
Replace SEO with Sales or Partnerships if you prefer, but for me, it’s SEO. I used Semrush and went deep for a few days to find out. Jackpot! I presented my SEO strategy to Dries and was confident it would work. Well, I was right:
Again, we are not building a rocket ship here.
UniHosted is 1 year old, and we have 7K monthly recurring revenue (MRR) and steady growth.
For a SaaS with good margins, this meant Dries could quit his job and go full-time on UniHosted. We hope to reach 20K MRR by year-end.
It might not sound like a lot, but making 20K per month with two people and good margins is a great start to giving you freedom and living on your own terms.
Final thoughts,
This framework is not a golden key to success. It’s a helpful guide to minimize the risk of working on the wrong stuff. Nothing more.
This approach has helped me pick winning ideas, but I can't stress enough how many other factors are involved in creating a successful business. The most important one in my journey has been my co-founders.
Adriaan (Simple Analytics) and Dries (UniHosted) are incredibly skilled engineers and great human beings. This is way more important than all of the above.
Also, this framework is not the only way to win “the bootstrapped” approach. I was inspired to write my own version after reading Corey Zue’s and Justin Jackson’s take on building startups. Both must read!
Finally, thanks to Harry Dry, Dan Shipper, and Nat Eliason for inspiring me to take writing more seriously, both in their own different ways without them even knowing.
Life is good.
Cheers ✌️✌️
Iron
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