Building Your Own Start-up Technology Company, Part 1
In: Columns > Innovating the Web Experience
Published on March 14, 2006
For technology professionals, one of the results of the Web 2.0 explosion is a realization of the potential for ambitious, talented, and experienced people to start their own companies and create their own Web products without spending very much money. Suddenly, the vision of being a garage entrepreneur once again seems like a possibility, particularly for those who are involved in user interface (UI) design and development. These opportunities used to be largely limited to the back-end engineers who could actually build the functionality, but now the UI challenges and opportunities demand the leadership involvement of front-end professionals as well. For many of us, this is an exciting development.
At the same time, a very common path that entrepreneurial Web design professionals have taken is to open their own Web services firm. Rather than building products, these companies provide clients with various services related to Web design and development. Even though the creating a new Web products company is the current flavor of the month, many of us are also still thinking about starting a new Web services company instead.
Both of these entrepreneurial paths offer interesting possibilities. But starting and growing a new company is not a simple thing to do. Far different from working as an independent contractor or consultant, the process of growing a digital products company or a professional design firm involves a high degree of risk and requires knowledge and skills that very few Web design professionals have previously cultivated. So, if you are interested in creating a company of your own, here are things that you need to think about and take care of if you want to do it successfully.
Five Steps Before Making the Leap
#1 Test the business viability of what you want to do
It is one thing to have a great idea for a product, or have sweet skills that would add a lot of value to potential clients. But it is quite another to fully build a product and—more importantly—make money on that product, or sustain and grow a services company over the long term.
You need to sit down and honestly assess the financial viability of what you want to do. This involves asking some really hard questions:
- Who will buy your products or services, and why will they be compelled to?
- What is your unique value proposition?
- What kind of resources—people, infrastructure, and money—will building this company require?
- How much income will there be, and when will the income start flowing in?
- How long can you personally go without making any money?
- Are you willing to decrease your standard of living, if necessary, to make this work?
- If the numbers aren’t looking very promising in the short term, do you have a source for a loan or other type of cash infusion?
- How much of your time will making the company successful require?
The trick of this process is that your estimates will almost certainly be way off. First-time entrepreneurs almost universally underestimate their costs and overestimate their income. When starting my company, we did a pretty good job estimating costs but our estimates on revenues were way off the mark. Despite our both being senior, experienced designers with robust networks, we essentially did not make any money—just covered costs—for the first six months. We began making good money again shortly thereafter, but we were lucky to do so. With any new venture, especially if you are creating a products company, expect to not make any money for a fair stretch of time, unless you are infused with cash from some outside source. That probably means a loan, either from a family member or with a bank. In some cases, you might even have an idea worthy of angel funding or venture capital. In any of these cases, be ready for the possibility of needing outside cash right up front.
Also, building a company is an extremely time-consuming process. You will probably never work harder than when you are trying to get started, established and settled. Go into this with your eyes wide open, and be prepared to work very long hours—often doing things outside of your skill set that you are not particularly good at or interested in doing. If you’re not willing to throw all of yourself into making this happen, chances are the business is not viable.
#2 Decide whether you want to run your company solo, or enlist the help of business partners
Once you’ve decided that you want to move forward, the most important decision you will make is defining your initial management team. In most cases, you could probably run a small company without other partners. However, working with other partners can really accelerate your growth, not to mention make work more enjoyable.
For example, even though my business partner and I are unified in our love for and philosophy about design, our skill sets are actually very different. Andrei is a dyed-in-the-wool interface designer, and was the UI design lead on the core Adobe product suite for years. He is the best in the business at what he does. On the other hand, my background is varied and includes not only design, but also marketing, business consulting, and corporate management. This proves a perfect fusion, as Andrei provides the leadership for our core design practice and I plan, sell and run the company. Even though in a different situation I could very capably provide the leadership for a core design practice, the fact is Andrei is just better and more experienced at doing that. And we benefit from that unique expertise. On the other hand, Andrei does not have the experience or particular interest in the business side of things, so my role in ably leading those things is of great benefit to him. It is an ideal match.
Some companies have more than just two partners. That can enable even more diverse skill sets to participate in running the company, or get different people with similar skill sets working together to take the organization farther. Having other people leading the charge just makes life easier; you are able to get more done, focus more on the things you are good at and enjoy, and balance out doing the things that no one enjoys.
But with more decision makers comes more complexity. There are times when Andrei and I really struggle to come to agreement on major decisions that affect the company. If there were more people involved it could be even more difficult. And while that sort of consensus decision-making process works for some people, it would not be a good fit for me, given the speed with which I like to grow and make decisions. So part of figuring this out is really knowing yourself. There are many people who aren’t comfortable negotiating any decisions, even with just one other person. And that’s all right—they can just start their own company, and hire other people to work with and for them instead of sharing ownership and management.
There is not one correct answer. It is a question of personal preference, specific context, and understanding what it will take to achieve your goals.
#3 Set and articulate a vision
Achieving success begins with a clear understanding of exactly what your definition of success is. Once you’ve got your management team together, you need to all sit down (most likely many times, at least sometimes over food and drink) and figure out what your company is, and what you are trying to achieve.
Defining your company is a matter of both market approach and internal structure and organization. In your market approach, you need to figure out both what you are going to be selling, and how you are going to position it in the marketplace. This takes a real understanding of your interests and skills, what the market is looking for, and how to build an approach to market that allows you to successfully sell your products or services.
On the internal side, you need to have a shared understanding of both how things will be structured and run today, and how that model will scale in the future based on different growth trajectories. This might sound like a complicated and difficult process, but it’s really just a matter of loosely thinking about—and ultimately agreeing on—a basic plan for scaling and changing over time. Most likely, even this plan will change as the growth of the company happens in ways that no one quite expected. But by beginning from a point of shared agreement, it makes it that much easier to adapt and adjust when things change.
Determining what you are trying to achieve is a much less practical exercise, and is certainly not rooted in anything that is likely to actually happen. After all, did Google intend to be a media company? Did Ideo intend to be a management consultancy? Did Razorfish intend to be an enterprise brand experience company? The point here is to set a goal, something to shoot for and aspire to. This will help to guide all of your planning and decisions. And my recommendation is to be bold. One of my favorite quotes is the old adage, “If you shoot for the stars and fall short, at least you will reach the moon.” Stretch yourself, and see how far you can grow.
#4 Create a powerful identity
This is probably the easiest part for design professionals. Once you’ve figured out your strategic market approach, you need to design the basic identity elements that will be the initial foundation for the company’s brand. Here is a short checklist of things to create:
- Positioning statement
- Web site
- Business cards
- Digital letterhead/document templates
- PowerPoint/Keynote templates and sales presentation
- Printed letterhead
- Return address stickers
- Sales/product sheets
Only for the well-heeled
- Printed brochure
- Printed envelopes
- Logo folders
People will make judgments on the perceived quality of your company, products and services based on the quality of your identity and collateral materials. Take these seriously. Get them right.
#5 If you are creating a services firm, try to start with clients you already have
The final point I want to make in this first part is a last reality check for you, especially those who are selling services instead of products. Selling services is hard, especially if your company does not have a portfolio or proof of past work. It’s best to start as an informal independent consultancy with a nice stream of clients and later scale up into a more formal company. Take the time to gather some clients, then make the larger investments in building the infrastructure of a formal company. It is extremely difficult to sell services with no clients and no portfolio. Take the time, be systematic, and start at a point where you are positioned to succeed.
Part 2 of this series will get into some practical specifics of getting started, including the stuff everyone hates (but has to deal with) like legal and accounting.
Dirk Knemeyer is a Founding Principal of Involution Studios LLC, a digital innovation firm located in Silicon Valley and Boston. Dirk is responsible for managing the business and for providing design strategy, brand innovation, and training services to organizations around the world. Dirk is on the Board of Directors for the International Institute for Information Design (IIID) headquartered in Vienna, Austria, as well as the Board of Directors for the AIGA Center for Brand Experience, based in New York City. He is also a member of the Executive Council of the User Experience Network (UXnet). He has published more than 100 articles—many on the topic of design strategy—and regularly gives presentations all around the world.