Saturday, March 11, 2006

The Five Buck Idea

Random Noise Blog brings us the Five Buck Idea which reads like a garage startup howto guide.

Don’t have a business plan. Don’t figure out how to make money. Don’t care about your competitors. Just give your users the simplest, purest, uncut, and unfiltered version of your five buck idea. And give it to them now. You want users. You want a community. You want to make it hard for people to not use it. This will not happen overnight.

The post is much, much longer. And definitely worth reading. It takes the firm "idea/technology over business" approach, which probably flies in the face of somebody like a Guy Kawasaki, but hey, whatever works. There seem to be two widely different schools of thought:

1) Got an idea? Make a business plan. Shop it around to get financing, and then you're in business.

2) Got an idea? Build something. Then keep making it better until you get noticed. The money will come.

Obviously #1 is not a bad system, as it's pretty much how things were done up until, oh, 2003 or so. #2 is pretty recent, except for a few exceptions. Even most of the dotcoms were really little more than shell companies shopping around their business plans with no real product, hoping to land some bigtime VC money.

The downside to #1 is you have to put lots of research time up front to be taken seriously. Who are your competitors? How much money can you expect to make, and when? I find those two incredibly hard questions to ask of a software feature where you might not even know what it does until you build the stupid thing. There's no freedom of creativity in this plan, you can't get a brainstorm halfway through and try new things. Well, you can, as long as you do those in addition to what you promise the investors you'd do.

The downside to #2, though, is that you never know if the money will come. Every day you'll face that "How much work should I put into this before I expect it to make me a profit?" question. "Profit" means different things, though -- sometimes the experience is a big deal. And the writer of the Five Buck Idea even says not to discount the fact that you'll have left your mark on the Internet landscape.

I think I like #2 better, because it's actually more conservative. It doesn't cost you as much. If people don't use your idea, fine, it's a $5 idea. Chuck it and wait for the next one to come. With #1 it's almost like you're betting the farm on your ability to predict your own success. If an investor comes along and gives you money based on your belief that you can make a million dollars in 10 years, then I dunno about you, but that would sure be hanging over my head every waking moment.

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