Smart Software: MicroISVs

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Eric Sink, has a new article, Exploring Micro-ISVs, in the Business of Software series on MSDN. Micro ISVs are software companies consisting of one person in it. I think many software companies actually start this way and develop into larger companies. One example is Nick Bradury, whose column I read regularly. He is the developer of HomeSite, FeedDemon, and TopStyle. He always has good advice to give on Software Entrepreneurship.

I actually studied a number of such small firms while in my business program. There's a thick tome called "Data Sources," you can find in the library, that lists thousands of private software companies, listing a description of the company, years in operation, number of employees and annual revenue. Private firms volunteer private information in exchange for some benefits, perhaps an actual copy of the book. (This was how I was able to locate my future competitors and make an educated guess to the potential size of the market for my product; some of my competitors, whose products will be made obsolete by more own, were making tens of millions of dollars.)

Some of the shops are mom and pops, consisting of a couple sharing responsibilities in the company--so not quite one person, yet they are still able to generate millions in revenue. Considering that the margin in software is extremely high, that's a lot of income passing on to one or two people. I looked at Id Software, and noticed that their revenue (a few years ago) was $39 millions with just 13 employees, that's three million dollars per employee. Of course, that's not a good example, since they are well-known and started the 3D genre with their hit Doom, but such ratios were not uncommon. Most firms pull in the seven-figure range, but those that do managed to enter retail tend to generate eight-figure revenues.

I am starting out as a Micro-ISV. I had plans to work with someone, but he didn't seem very much interested in a contributing role, and so we went different ways. I am looking for partners with complementary skills. I plan on being profitable before even considering investment capital, but, at some point, I will want to grow "big" after I have taken care of my financial well-being. Starting out with VCs is probably wrong (and difficult, since, nowadays, you need both a shipping product and existing customers before you can obtain funding). Venture capitalists have goals, which are not very aligned with founders. As Joel said in Fixing Venture Capital, "founders want reasonable success with high probability, while investors look for fantastic hit-it-out-of-the-ballpark success with low probability." Venture capitalists have a name for moderately successful businesses, called "walking dead."

Being a Micro-ISV isn't too bad. I was fortunate to have a good preparation as a computer science major in college, an application software developer at Microsoft, and a student studying software entrepreneurship at two different business schools. I should be able to eke out a very comfortable living, develop a name for myself, and push the edge of technology.

In addition to the above links in this post, here are a few other software entrepreneurships feeds that I subscribed to, if you are interested in being a Micro-ISC: I have several more, but I would need to hunt them down.

Right Wing Techie. A number of post deal with a small software company StarDock, that has sold millions of copies of WindowsBlinds. A recent post details a day in the life of a small software company CEO.
Joel On Software. A former co-worker of mine, he left Microsoft Excel a few months after I joined in 1994 and started his own software company; I have a vague recollection of knowing him.
A Shareware Life. Another post that I have happened across.

Various software marketing journals feeds.
Software Marketing Journal.
StartupJournal.
StartupSkills.
Software Marketing Resource.
Software Marketing News by SharewarePromotions.