Feb 1

Tim O'Reilly

Tim O'Reilly

Big/Global or Small/Local?

Steve Zagerman wrote a really interesting message on a mailing list connecting north bay entrepreneurs. I thought it was worth sharing, and getting feedback from radar readers.

Michael said something in answer to my prev post re: sizing ad-driven businesses about being able to generate $100k/year from such a business... This raises a question that I've pondered over the years since the last big bubble burst which I think it'd be interesting to hear some of group's thoughts...


After the bubble burst, I talked to a number of people who had been involved in some big internet plays (some of which worked out and some of which didn't quite) who said:

"I think I'm gonna try to come up with something next time that is smaller, maybe local in nature, that'll throw off a couple hundred thousand in profit a year, give me a nice life, let me have more time for other things, and be with my family."

So, the question is for those of you who are involved in or are looking at starting ventures, are you thinking about something big, a paradigm shifting play, something that the world may notice, something with the prospects of a jackpot... and that may require more funding, more people, more hours?

Or are you thinking about something smaller, something more local, and maybe more sane... and that gives a decent living and lifestyle?

Even if you're not entrepreneurial and starting/running a venture, this is kind of the same question I used to debate with other devs years ago about the 9-to-5 type of job that didn't challenge, but gave more time for other interests and pursuits outside of work vs. the killer job at startup that might have been more dynamic and vital, but also more life-consuming.

Interested to hear what y'all think...

Answers to Stephen's question might give some hints about the changing nature of the entrepreneurial opportunities on the web (as opposed to in other spaces), as well as about the aging demographic of web developers from the first boom. If we get enough answers to be countable rather than just readable, we'll crunch some numbers and post the results later. So, to the entrepreneurs among you: Are you swinging for the fences, or are you simply trying to make a decent living without working for the man?

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Comments: 21

  Krishna Kumar [02.01.07 03:55 PM]

I am not an entrepreneur, but I think a relevant question is also this: Suppose all you are doing is to trying to make a decent living and suddenly your Web project idea is a big hit and you are attracting thousands/millions of customers. What do you do at that point? How does your life change? Or do you want it to change?

  monopole [02.01.07 04:05 PM]

I'm always swinging for the fences, but as I get older, my aim is getting better ("A man's gotta know his limitations"). Of course my work is engineering and hardware, so the 100K on ad revenue doesn't quite map.

The funny thing is that, seemingly small local efforts can have immense impacts while seemingly global huge impacts can vanish without a trace. Thus linux, napster, bittorrent, and XViD, can radically change the world, while huge efforts like the UMD disc or most of the big heavily publicized web projects during the boom can flop completely.

  Alexandre Rafalovitch [02.01.07 04:21 PM]

An interesting question would be whether 'local' or 'niche' be a better criteria.

It is important because it might be possible to have a small business drawing smaller amounts with the target group distributed all over the world, rather than in your neighbourhood. This obviously is a web-based business, I am talking about.

There are obviously some differences between niche and local as well. Dealing with timezone and languages would be a prime example.

For myself, I would go for the niche business related to one of my hobbies.

  Matt Savarino [02.01.07 04:27 PM]

In my personal ventures, I've had a lot of success with, which is focused on video bloggers worldwide, and, which focuses on action sports worldwide.

Although a financial reward is not my end goal, I often find myself wishing I had the time/money to take them to the next level.

I know both sites have huge potential on a global scale, but I felt more connected and was driven more when the vlogging community was small and when I focused on just the Northwest snowboarding scene.

Who knows what will happen to these sites in the future, but I'll continue developing because that is what I love to do.

Basically, I'd rather work for free on something I love than get paid to do something I hate.

  Paul [02.01.07 04:40 PM]

We're swinging for the fences, and how.

The funny thing is, it will be through a local approach. Look out for our IPO in a few years =)

  BillyG [02.01.07 05:15 PM]

I don't consider myself an entrepreneur, but it will be interesting to see the results on this one. Nice question.

  Monty [02.01.07 07:44 PM]

Although I'm currently employed at a startup that is aiming very high, I'm personally starting a side project that would just be me, with the hopes of growing it in a few years to be my main salary. I think there are plenty of simple things that haven't been done simply enough. Plenty of room for small fish.

  Paco NATHAN [02.01.07 07:49 PM]

That's an interesting question. I'd have to say that the opposite trend seems to hold in some cases.

When we launched the venture which I road into the "Bubble" - FringeWare - I'd just turned 30. We opted for the "decent living and lifestyle" route back then, mostly out of open cynicism for the hype swarming around us. We drew flack for that cynicism, and maybe passed up a few opportunities, but it was a life lesson well earned.

This time around, I'm in my mid-40s, with a decade plus more engineering under belt, likewise much more management and business experience, and substantially better long-term relationships cultivated throughout the industry. Having struggled as an entrepreneur during the "Bust" gives me lessons on which I can rely. Having watched Silicon Valley cycles since the early 80s also adds invaluable perspective. Now with this venture - HeadCase - it's time to aim high and go long.

  Julian Bond [02.02.07 12:34 AM]

For getting on for 20 years now, I've dreamt of being involved in a business that was a nice little earner but which more or less ran itself so we could spend 20% time on experimenting with other ideas. In reality every business I've been involved in has grown like topsy so it takes 120% of my time and brain power. There's *always* more to do in the primary business than we've got time for.

It feels to me like it's time for the Web 2.0 incubator to appear. Working for the incubator instead of for the startups it incubates would be perfect for me! So what happened to the people who started the Web 1.0 incubators?

But having said that, a bootstrapped business that turns into a nice little earner is a perfectly reasonable goal. Not everyone needs an exit route with a big pay off. The problem is that you pretty much have to do it by bootstrapping. The moment you take other people's money (whether VC or friends and family shareholding) you'll get pressure to grow and exit.

  Paul Browne - Technology in Plain English [02.02.07 12:42 AM]

What about the people in the middle? The ones with the 'misery of success' Enough to keep the business going , pay back some VC, but far from the hopes / dreams / rewards they started out with.

To answer the first question: We're currently small / local and will probably stay that way. Might not be the next YouTube or Skype, but earning a (good) living doing something you enjoy is a privilege.

  Paul Robinson [02.02.07 02:35 AM]

All websites are niche, and there is no such thing as 'local' any more. If you think MySpace, Digg, YouTube et al are only used by people in one geographic location, you're wrong. If you think every person on the planet will use them, you're wrong.

They're all global, they're all niche. The difference in size of community comes down to execution, and size of niche target audience, not what the guys were aiming for. If the founders of those sites tell you they thought it would be huge when they started, they're lying.

For myself, I'm interested in playing with ideas and making them pay well enough to be able to give me a comfortable lifestyle. Steve Pavlina does a good riff on why you should never have a 'real' job, and that's the life I want. Money is vastly over-rated, and freedom - in this world of detention camps, "the Geneva convention is a bit vague", and "you just want to embolden the terrorists" - is vastly under-rated. Give me freedom and enough to live my life on, over being trapped into a 90-hour work week for a few million, any day.

  Jared [02.02.07 04:12 AM]

I'm not an entrepreneur - not quite yet. But I aim to become one, and my immediate goal is to make a decent living off of it.

Does that mean I'll never swing for the fences and make my mark? I honestly can't say. I'd like to think I would work on the next big thing if my living expenses were completely covered. I don't see any need to worry about that until I've achieved my immediate goal.

I guess you could say its a Maslow's needs situation. Survival comes first. I used to think that corporate programming was safe - you could always get a job. Now that I'm older (age discrimination is a fact in IT, IMO) and offshoring is a growing trend, I don't see a job as something that I can count on in the long term.

Also, I've been a "corporate programmer" for more than a decade and I am really sick and tired of working for people who just don't understand software development and are constantly making a hard job harder.

Couple the lack of safety with a dissatisfaction with the way most companies (I've worked for, at least) develop software, the idea of trying to do a small business makes sense.

I suspect that there are a lot of programmers out there thinking along these lines. If that's true, then we may well see lots of small ventures in the future. Only they won't be coming from folks who used to think big, but folks who used to think very small (e.g., I'll just get a job) who are now thinking a bit bigger.

  Fool and his money [02.02.07 07:11 AM]

Getting my first venture to just pay back my investment is what I'm focused on.

  Tyler [02.02.07 07:25 AM]

Definitely just looking for a comfortable living out from under the thumb of 'the man'. Building something new is certainly fulfilling, but spending time with family and friends is more so.

  KimS [02.02.07 08:24 AM]

I've been an entrepreneur since the Dot-Bomb when I found myself unemployed, along with a 100 or so of my colleagues. I'm coming up on 5 years running my small marketing consultancy, and life has never been better. While the early years were lean, I've been able to make a decent living without the crazy stress of the frantic (in a negative way) of the start-up. I focus locally, and am a fan of helping early stage and non-profit organizations. It's great to be a part of an exciting, growing team without actually being _in_ it. I work hard and long hours but I love what I do, and I've got flexibility: working in a home office, and the option to do lunch with a friend and be home at 3 for my son. It's a great combination for me.

  Martin Edic [02.02.07 08:44 AM]

Having worked at a company that was shooting for the stars I've decided that my new venture will be smaller by intent. One, its a lot easier to use existing infrastructure like S3, two, I don't need legions of programmers and three, I'm getting older and I want a business I can run from a laptop in some far off spot. All of these things add up to my vote for a biz that throws off $500k a year either in profit or through being acquired for $10 million or so.
I'd like to think I've found that combo.
Oh, one more thing: No VC capital required...

  Simon Venture Capital Brazil [02.02.07 11:38 AM]

Interesting question!

What I wonder though is whether this is really possible.

So, for example, my experience is that you are going to work as hard building your US$100 thousand a year business as you are your US$1 billion a year business.

If this is indeed the case, aren't you are better off shooting for the US$1 billion business?

  Martin Edic [02.02.07 01:55 PM]

I realize my previous post answer should have been Small/Global!

As for a $100,000 business being as much work as a billion dollar business- no way. Ever have to make a $2 million payroll? Fire half your people? Give up equity over and over? Compromise a product to get a big partner? Travel incessantly until jet lag is your normal state of mind? Eat way too many chain resturant meals? Spend your entire week in meetings instead of actually doing things?
You can make a $100k a week freelancing 20 hours if you're good at something (it takes time to get there but it is very possible).
Good thread here...

  Simon Venture Capital Brazil [02.02.07 06:39 PM]


Martin, you raise valid points and I am not even sure that I necessarily disagree with you.

Extrapolating from personal experience however, I have found that there are certain people who spend as much time as possible perfecting whatever it is that they are working on so, given the fact that they are going to be working continuously anyway, they might as well swing for the fences.

  serge [02.04.07 07:10 AM]

These days, after almost 40 years of writing software, including open source code over the last 5 years (part time), I see some new patterns in our industry, and some are disturbing, at least in North America.

1) It is getting harder to keep a day job. Companies and organization structures come and go at an accelerated rate. The rate of mental sickness is increasing (e.g., burn-out).

2) Most software projects are now nano projects, lasting a few days to a few weeks. In the 1990s, a *small* software projects was 5 people over 6 months. Not any more. Now a *large* project is often 3 developers over 3 months.

3) Experienced developers are competing with inexperience and experienced developers working at 1/2 to 1/10 the pay, because for most managers today, one inexperienced developer is assumed to be equivalent to one experienced developer if they both can write code in the flavor of the day, and to some managers, it doesn't even matter where the developers are located on this planet.

4) These days it seems that most so-called architects, aka. systems designers, are incompetent trend followers that only care about putting some new buzzwords on their resume and don't care about building a good system, and don't even know how to do it if they tried. The industry is riddled with egotistical, unethical, careless, incompetents, who are still being hired by managers.

5) Many excellent developers are trying to escape from the often absurd day-job software industry by trying to make money with open source projects, but I would be very surprised if more than 1% were making enough money with their open source project to quit their day job.

Community: An open source project to be successful apparently needed a community of developers/users. I started a few open source projects, for example one on sourceforge and two on, and the largest community that I managed to get was one other active participant and a few quiet lurkers. On the most active project, which has a working application, I get on average one download per day (on sourceforge).

Partial success: I failed to obtain income from my open source projects but the other objectives were attained. I did manage to complete a complex application that is doing something unique and I did learn a lot about the technologies involved, such as multithreading and distributed app. with near real-time requirements. These new skills that were horned by writing this open source code have been extremely useful in my day jobs. And I am happy with that.

Lost illusions: the open source movement is great, I still see a lot of potential from it, mainly because it is bringing freedom to our industry, but it is not a serious source of income for the little unknown guy or gall. The open source movement is extremely influential for the software and hardware companies, for their clients, for governments (e.g., for new policies), but open source is irrelevant financially for the individual developer (at least for those who do not live near San Francisco).

New industry: the open source movement has now mutated into a new industry where the little gall or guy has just the same place as she or he had in the old industry. A few previously little guys, and even fewer galls, made it to the rank of the not so little, but for the rest of us, it may be game over. The community requirement for a successful open source project may have been valid five to three years ago, but in 2007, it may be a thing of the past, replaced by the good old business connections requirement (which are the basis for the Web 2.0 conferences, TED, etc.)

The original question: So, if we go back to the question of shooting for over the fence versus keeping it small, I would say that either approaches are doomed if you do not have the right industry connections.

This blog is one of my favorites and I have nothing against it, on the contrary. But to me this blog is an example of the new industry that I am trying to describe. The author, you Tim, your clients, you as a group, are examples of the connected people of the new open source industry. And a large part of your corporate income is from the activity of that industry. You are successful but your business model is not one directly based on open source products.

The comments from this post also seem to confirm that open source projects per se will not provide the minimal income levels required for supporting a family in North America, no matter how high one is shooting for.

If there are examples of *unconnected* open source projects that are succeeding today, even on the very small scale of allowing one person to quit their day job, then I would like to know about them. I sure would like to be proven wrong on this one.

  Chris Yeh [02.18.07 09:01 AM]

Ever since I had kids, I've been unwilling to work the kind of hours I used to work. Back when I started my first company, a 10-hour day was a short one. Now, it's shocking when I actually clock 8 hours in the office--I'm usually right around 7 1/2.

It definitely changes some things. Rather than swinging for the fences myself, I find myself devoting more of my time to mentoring and advising the young entrepreneurs who still have the time to go wild on their projects (case in point--the 22-year-old entrepreneur I've invested in who calls me at 10:30 at night for advice).

I think I can still do amazing things, but I'm beginning to see why so many entrepreneurs get turned to the dark side of VC as they get older....

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