A Mogul To Be

Building a web startup on a budget

January 23rd, 2007 by Robert

Thanks to the TechCrunch forums, I found this text document describing how much the startup DropSend spent on building their service.

The figures are in British pounds and according to Google the current exchange rate is almost $2 per pound which means they spent just under $60,000. They have some good general guidelines, such as:

• Don’t build for acquisition. Build your business for profitability first. If Yahoo! or Google comes along and wants to buy it, wonderful, but don’t build it with that intention.
• Have a financially viable idea, and don’t worry about being caught up in another internet bubble. If it is worth buying, people will pay for it. A great example here is SmugMug. They offer a pay service for photographers and photo sharing. Yes you can find free alternatives, but people will pay for good service.
• Try to limit the amount of features to get the product out and the get money in.

Some of their money saving tips:

• Barter for any service that you can to avoid spending cash.
• Don’t spend on anything that you absolutely don’t need. Don’t call, use IM. Don’t buy stationary, etc.
• Use free and cheap software. Open source is your friend!
• Shop around for services. This is especially true for hosting which can vary widely.

I think my favorite tip of all pertains to lawyer expenses:
  ”Get a free 1 hour consultation - from as many different lawyers as possible.” Now that is a great idea!

They contracted out for pretty much all of their development, which can also be a widely varying expense. One area where you can save some money on pertains to graphics and the site design. Go to your local college or put out an ad in something like CraigsList asking for a college student/intern to do some graphic design for you. You get the graphic work for no or minimal cost and the student gets exposure and something to add to their resume and portfolio.

Being a software developer myself, I would advise against going this route for the actual software work. For a web startup, this is the core of how your business operates and should be done by someone with experience. The last thing you need is for your application to go down because of bad or inexperienced programming. For all intents and purposes, quality software can written in any programming language so if you aren’t particular don’t sweat this aspect too much. Having said that, using open source solutions can really save you some money here. The LAMP solutions (Linux, Apache, MySQL, PHP) is such a common platform these days it shouldn’t be hard to find developers who are familiar with it. Going this route will save you not only on development costs, but also licensing costs, which for all four of the LAMP pieces is nill.

There are other varieties of open source as well which are popular, such as Ruby and the Ruby On Rails toolkit — popularized by 37Signals — the PostgreSQL data and a few others. The important thing is that these are free and being popular means that developers can be found relatively easy.

While building a web startup can be done for less depending on your resourcefulness and contacts — Kevin Rose is reported to have paid a buddy $1000 to build the first incarnation of Digg — shelling out $60k isn’t all that much when you have a great idea with potentially 10’s or 100’s of thousands of users using your service. Those users can either be directly paying, such as SmugMug, or that traffic drives good advertising rates.

Anyone have any other money saving tips?

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