Hi, everyone. My name is Tom, and today I'll be talking to you about starting an open-source
startup. So about this talk, it's directed at early-stage startups or people thinking
about starting one with an open-source product or people thinking about open-sourcing the
existing product. If you were here for the previous talk, it was more about the step
one to step two. Here I'm going to talk about the zero to one. You don't have a product
yet, you're just starting out. And so what is an early-stage startup? For the purpose
of this talk, it's an early-stage company that's designed to grow fast, often backed
by venture capitalists, so investors, and aiming for very high revenue. You have to remember,
and maybe it's important to frame the rest of the talk around this, is that this is a
capitalistic endeavor. You're taking money from people, and you're promising them to
return them more money after a certain amount of time. And you have to remember that all
for our thing. It's something that's so easy to forget, but that's the basis for everything
else. And it's especially easy for us to forget, because we're so used to giving so much free
value to the world with our open-source contribution, and also taking a lot of free value back by
using Linux, by using KDE, by using all of these tools. But if you're out there building
a business, taking money from investors, that's something that is important to remember.
So who am I? I'm the founder and CEO of Sviks. It's a company. We started as a business,
and then open-source the product, although that was the intention from the beginning,
and also created EtiSync that started as an open-source project, and then turned into a
business. I'm obsessed with API, developer tools, been around for a while, worked on
Elightment, OpenMoco, and a few other projects as well. So what is Sviks? We do webhook sending
as a service. It's an API-first developer tool. We help companies send webhooks, essentially.
It's both open-core, hand-on-oaster product, as we do both. We raise over $10 million from
top investors, including Y Combinator, and Treason Horowitz, RF, and founders and CTOs
of companies such as GitHub, PagetGT, Segment, Lookout, and Fly.io. So why am I even giving
this talk? So there are a lot of resources for how to start a startup online. A lot of
great resources. But there aren't a lot of resources for open-source startups, especially
not ones that come from the community, from people that actually understand open-source.
It's more like an opportunistic approach that a lot of people take. And also, a lot of people
have been asking me for advice over the years, even this weekend. I figured, why not? Let's
make a deck out of it.
So before we begin, why even start a startup? I saw a talk by one of the co-founders of
Facebook many years ago, and it really resonated with me, especially now that I've seen other
people start companies, I've started companies myself. And a lot of people think it's cool.
Your vision is that you're going to hit launch, you just finish building a product, you get
press attention, go wakeboarding with Obama, or I don't know what you want to do, Rockstar.
But the reality is that no one is actually going to care at all. You're going to beg them
for press attention, you're going to beg customers to use your shitty product, and really, honestly,
you don't have time for press and all of the Rockstar stuff anyway, you're building a business.
And also, a lot of people think that they want to be the boss, you know, big office,
private steam room, make a billion dollar deals, private jets, all of that stuff. In
reality, it's a noisy co-working space, if you're lucky, most likely a kitchen counter,
and begging people to try a product again and fighting for survival. So it's really
not that, it's not like what you think. Another thing people think, well, I'm my own boss,
I'm going to have flexibility. I love this quote, as an entrepreneur, you get some flexibility,
you get to choose which 24 hours of the day you work on. It's so true, and for a variety
of reasons, first of all, your customers are demanding, and you want to make sure that
they're served right, you don't want to lose that deal just because you're unavailable,
even though it's your wife's birthday or some other occasion. And the other reason is, you're
really obsessed with what you're building, so you're actually thinking about it all the
time anyway, and you have ideas in the shower, and you have ideas during dinner, and you're
just dying to go back and kind of like put that into reality.
Another bad reason is that you want to have more impact. Honestly, just join an early
stage startup, you're going to be working on a product that's already well funded, doing
well, and you're going to grow with the team, become the CTO maybe, it's like, you know,
it's a great path, or a late stage company. You know, I worked at Samsung, my code was,
you know, it's been used by millions and millions of people, or at least devices. That's much
more impact than any of my companies have reached, you know, so far. So that's just
something to keep in mind. Another thing, you want to get rich. That's not a good reason,
because the likelihood of success is very low. You're most likely going to have like a really
low salary for many years, and then you're going to go bust. Not a good strategy if you
want to make money. Again, join an early stage startup, a premium 50 at Facebook, for example,
is a multi-multi-multi-millionaire, or just work at Facebook, Google, all of those companies.
Again, I don't recommend, but if this is what you want, then you're just chasing money,
you can do that. And you have to remember, it's going to be absolutely brutal. So things
are going to go wrong, deals are going to go full through, you're going to get a lot
of nose from candidates, from investors, from literally everyone, all the time. You're going
to want to quit, but because you're the founder, that means that if you quit, the company is
going to close, and that means your employees are going to lose their job, and your investors
are going to lose the money invested. So you're really like, it's really hard to quit as a
founder. Okay, so we covered all the budget stuff. So why actually start a startup? And
there are a few good reasons. One, you really care about the problem. You want to cure cancer.
No one else is like, cracked it yet. You think you have a shot? Go for it. You're really
passionate about your idea. You have, I don't know, Uber for cats, terrible idea, but like,
this is something that you really care about, and you want to get, because everyone thinks
it's terrible, I guess, for the laughs. Like, no one else is going to build it. You decide
to build it yourself. And you just want to start, maybe, your own company. You just,
I don't know, whatever reason, this is what you want to do. And just make sure that your
motivation is long lasting, because you're going to need it for the next 10 years. Another
good reason, a bit more altruistic, is that open source startups are good for the community.
Much more money and talent into open source, great open source products. You know, we're
all going to use them every day. And also, open source startups tend to support the rest
of the community. We support other projects, both financially and by upstreaming patches.
We also employ the maintainer of, like, Redis Rust. And so, again, great for the ecosystem.
But you have to remember, there are other alternatives. You can join a promising startup. You can
start a non-VC backed startup, much less of the stress that I mentioned. You can start
a side business. I've done that. It's great, much less stressful, still stressful, but
much less. Or you can just start an open source project. Again, I've done that. Many people
in this room, I'm sure, have done it as well. It's a great way to just, you know, put something
out there without the pressure of actually having returns. And so, really, just, like,
be true to yourself and what you want, because, you know, you need to know what you're signing
up for. So, let's talk about getting started. The first step in the journey is validating
your idea. So, is this a problem that people even care about? Are you the right team to
build it? How will you make money? How will you get customers? How big is the opportunity?
You need to constantly validate your riskiest assumptions in order to not go, you know,
like head on the wrong direction. I highly recommend filling in the white combinator application.
Like, white combinator is like an accelerator. Even if you don't submit it, it just forces
you to think very thoroughly about the business from the eyes of investors and from a business
perspective. And it's been, like, very helpful for me. And you know how people say there
are no bad ideas? There are definitely bad ideas. Some threads of common bad ideas are
the ones that are very obvious. So, for example, oh, I'm going to start a startup for teleportation.
Great idea. I'm sure all of you guys are going to, like, pay instead of, like, taking the
flight back home. But the problem is it's actually technically difficult or impossible.
That's why no one has started it. So, you know, it's the first step of validation. The other
type of bad ideas is when you have a solution, you build a project, you're really excited
by it. That's what you want to work on. The problem is it's not applicable to everything.
I don't have a good example from the top of my head, but there are many of them. And I'm
sure, you know, like, the more crypto, you know, crypto, God, haters will use the crypto
as an example for that. Also, another one, I get pitched a lot of ideas about, you know,
spaces that the two B founders know nothing about. You know, I know nothing about cancer
research. I'm not going to start a cancer research company. And one last thing, which
is actually not a bad signal, people telling you that it's bad. And that's, you know, going
back to, like, why doesn't exist? Because everyone thinks it's bad. And that's where
your opportunity lies. So, just ignore the naysayers. I asked Paul, like, the co-founder
and CEO of Superbase, what's his best advice? And he said, everything should be open source,
but not every open source should be a business. And that's so true. Again, validate, verify
that what you're building is actually a good business. In the now immortal words of Y Combinator,
you need to make something that people want. That's it. So, when you start, all you need
to be focusing on is writing code, showing it to customers, getting feedback, talking
to them, all of that. You know, in the open source world, we now release early, release
often. That's how you get things to the back hands of customers or users and you get feedback.
It's much better to find a few that really love what you're doing than many people that
are, eh, because the few that love, really love it, are going to tell their friends about
it. And the few that are okay about it are going to stop using it after a certain period
of time. Also, 90-10 solution. So, find how you make the most impact with the less amount
of time. Like, perfection is really the enemy of good here. And the last thing, you want
to do things that don't scale. So, what do I mean by that? There are, like, certain activities
that you can do at this stage of the company that are definitely not going to work once
you have a billion users. But for now, you can do them. So, one example from our, from
the beginning of Svix is that I used to send the API keys encrypted to our customers. We
didn't have a sign-up flow. There was no need, right? I don't know if anyone wants the company
or wants the product. So, like, why build a sign-up pro? Why build a landing page? None
of these things matter in the beginning. So, just focus on the product.
Another great quote that I love is from Steve Jobs. So, everything around you that you call
life was made by people that were no smarter than you are. And you can change it, you can
influence it, and you can build your own things that other people can use. So, it's really,
don't be scared because it looks, you know, it seems difficult. Just, like, go for it.
Really just go for it. So, before you start, ignore the naysayers, but be honest with yourself.
You know, a lot of people are going to tell you what you're doing is stupid, silly, bad
thing. Maybe they're right. You have to make that call. And effort counts for nothing.
This is not school. If you don't get results, it doesn't matter how hard you work. It doesn't
matter, like, how much you tried. It doesn't matter how cool your code is. It just doesn't
matter. Again, do you risk the business? You have to listen to advice, but decide for yourself.
First of all, it's because it's practice for later stages. You're the only one running
this company. But also, you're the only one with a lot of context about what your customers
want because you've been talking to them all the time. And, like, what doesn't work because
you've been writing the code. So, really, just decide for yourself. And remember that
most startups fail, like the vast majority. So, if you're doing average input, you're
going to get average output, and that means deaf for startup. So, definitely watch out
for that. Okay. I think that was, like, the beginning.
Now we can talk a bit about the product. So, the first and most important thing is understanding
the problem. And you need to know your customers, what they want, what they care about, what
they hate. Really have the curiosity of a child and really get to have, like, as most
empathy as you can. A good hack in the beginning is being your own customer. That really works.
But you also have to make sure that there's a path to other customers that are different
than you are. Because if you're just building, you know, like, I don't know, like, a name
tags that just say the name Tom on them. That's great. But there are just so many Tom's in
the world. I don't think it's, like, a good business.
Another quote, I love quotes, is from Henry Ford. It's asked people what I wanted. They
would have asked for a faster horse. And that means don't, you know, listen to your customers,
learn about their needs and wants. But don't follow blindly. Say no. It's absolutely fine
to say no. You also have to remember it's about what you do. It's not about what you
do. Sorry. It's about what you enable. And so people don't actually care about drills.
I mean, drills are fun. Don't get me wrong. But what they want is holes. And you have
to figure out how you give them a hole. And again, don't, you know, don't obsess on the
fact that you already have a drill. And another part about this is, you know, we talked about
product, and that kind of implies, you know, what people actually use. But really, when
I asked James about his experience, he said something that really resonated, which is
your old company is the product. And actually, Zeno also concurred. And from my own experience,
like, it's, I've lost counts, the amount of products that I really wanted to try. And
I went to their website, and I couldn't understand really what they're doing, but I thought maybe
it's relevant. And I went to their docs, couldn't understand how to get it started, and just
dropped off, even though I'm sure it's actually the perfect product for me. And it's the same
with every other aspect. So, you know, like marketing, customer success, all of those
kind of things. You have to obsess with a customer experience. So obviously, I have great customer
service, as I mentioned, you know, your wife's birthday, but the customer is calling. You
may need to, like, drop for a few minutes. And but much better than having a great customer
service is actually fixing the docs. Like, why should they even have a problem in the
first place? But even better than fixing the docs is just making the product easy to use.
So, you know, same defaults, great onboarding in the product itself. And all of those things
make for a much better experience. Now, I know this doesn't need repeating at FOSDOM,
you know, just like looking in this room or looking even outside with all the stands
of the amazing communities that are powering, you know, this whole event, but maintaining
a healthy community really matters for an open source project, because that's how you
get contributors. That's how you get evangelism. That's how you get all of those things that
later on turn into business goals. As I said, capitalistic talk. I'm not as cynical in real
life, but I'm just like trying, just showing you the connections to business value. And
so be quick to respond to PRs. The most annoying thing, I opened a PR like two years ago. Got
feedback a few months ago. Obviously, never fixed the feedback. I mean, that's ridiculous.
There are tools to help to make sure that you maintain a good community, like Orbit
Love and also the community dev room here at FOSDOM. Okay, so we talked about a product
which maybe some of you know, maybe some of you already built a successful open source
project, but now what we need to remember is that we're actually building a business.
We're no longer just engineers, and we should focus our time on non-engineering tasks, which
is so hard, and I'm going to talk about that in a bit. But the first step is understanding
your business model. And what is a business model? It's just a fancy way of saying how
are you actually going to make money? There are many different models for open source
and many different models for non-open source. Red Hat and Canonical, they're a great example
of selling additional services, so training, support, consulting, packaging, so like packages
literally. Another example is OpenCore. So you release some of the source code as open
source and then proprietary stuff on top. GitLab and RedDisk both do it. Again, very
common. Do a licensing, so cute and free buy they do it. So you have licensed your code
as copy left or something that is not compatible with some companies, and then they pay you
an extra fee to kind of like unlock it and get an enterprise contract. And then you have
managed cloud, SaaS. Oftentimes goes hand in hand with OpenCore when you have your features
only in the SaaS product and again for the enterprise. GitLab and MongoDB both do it.
You can either run a multi-tenant SaaS or you can just run the product for them. And
there was a time that OpenCore was the way to go and then SaaS became the way to go
because the advent of the cloud. And actually OpenCore is getting some traction again because
a lot of people want to sell first with GDPR, all of those kind of things. People are looking
to sell first again. And then another one that's not often talked about is supporting
products and services. So that's kind of like similar to OpenCore, but you're not actually
extending the product, but you're providing services on top of it. So good examples are
GitHub. GitHub has nothing to do with open source, but they're riding on the Git success.
And Android, Google is selling services over an operating system that was open and can
be customizable by many of the, you know, by all the other form manufacturers. You can
also combine multiple models, but you should know what your main driver is. You're an early
stage startup. You probably have like one person or more likely 0.1 person like working
on this stuff. So you really need to focus and see like what's the main driver for you.
And now, because you're building a billion-dollar business, you're going to have a lot of competition.
Other people are going to see your success. They're going to see your opportunity. We have
numerous copycats that have launched since we started. And you have to figure out like
how do you protect yourself? So there are a few common ways for open source projects.
One way is the license. Obviously, I'm sure those need no introduction here. Copy lefts
or GPL. The problem with those is that oftentimes they're not liked by enterprise lawyers.
So it's really hard to sell to an enterprise if GPL is just banned from that enterprise.
So that's something to watch out for. Then you have the permissive ones, which is what
we chose, but they don't provide any protection. And then you have the non-free or FOPEN, obviously
not open source. I understand where they're coming from. Like seeing AWS just take your
business, host it, and then take all of your revenue stream probably is not fun. I don't
know what I would have done in that situation, but it's definitely, I can see how there's
going to be like more innovation in the licensing space just following the mega-cloud companies.
And the last one is usually, it's like CLAs, usually tied with copyright assignment. And
then when you do do a licensing, you need to actually own the copyright. So contributors
assign the copyright to you, and then you can re-license.
If I asked multiple lawyers and founders, and almost all of them said, own the trademark,
your license is probably too liberal to protect you. And the trademark is the reason why Mozilla
can say, well, you know, like can prevent a competitor from starting Firefox plus plus
or Firefox remix, all of those kind of things, because that is actually confusing to customers.
And that's a good line of defense. And I think like a few years ago, the founder of
own cloud actually gave a talk here at Forstem, and he mentioned that they never had the trademark
for own cloud, and that prevented them from actually, you know, offering a good hosted
service, because there were so many clones, and there were so many people that, you know,
that claimed to be the official one, and it was like really hard for them to actually
maintain control.
Another one is network effects and ecosystem. So if you look at GitHub, or even GitHub,
even though it's not open source, it's just because everyone is there, that means the
new projects are going to be hosted there as well. That's it. It's really tough to break.
But even without, you know, a SaaS component, just think about Postgres. There's so many
libraries for Postgres, and so many utilities for Postgres across many languages, and across
many, like, they're just, the ecosystem is vast, so it's really hard to append Postgres
from where they are. So that's like, again, another good line of defense.
Also remember, you know, plans are worthless. Everything is going to change. You're going
to change your assumption. Everything, it's really in flux. Like, it's hard to understand
how much things, sorry, how to explain how many things change on a single day. But actually,
the process of planning is extremely valuable. You know, I'm going to say a word that probably
sounds scary, which is like financial modeling, but it's really, you just go and download
a spreadsheet, fill a few values, change it to whatever you need, and that will provide
you a lot of insight into the levers that actually move your business. So if, for example,
you want to charge people $5 and you think you're going to be able to reach 2,000 customers,
that means that you're going to make $10,000 a month. Maybe enough for you, maybe not enough
to sustain a business, but now you know, maybe you need to increase the price, or maybe you
need to have a different business model. So really, just the process of planning is extremely
valuable. Now that you know the plan, you kind of know
how you're going to make money, it's very important to assess the business opportunity.
One common wrong way to do it is to say, well, you know, the software industry is vast. It's
$1 trillion. If we do really well, Microsoft has 5% of it. If we do really well, we can
go to 1%, and that's a lot of money. Realistically, that just doesn't make sense, and there's like
so many variables that are hidden here that, you know, it just doesn't add any insights.
Like the much better way to do it is bottoms up analysis. So it's essentially you saying,
well, you know, we make $5 out of each customer. I think we can get to a million customers
next year, and then 5 million 5 years after, and then 100 million 10 years after. And you
probably not going to hit 100 million, or probably you're going to change some stuff
in the business, that's fine. But just understanding that where you're heading is a $500 million
a year business, that already gives you enough of context, and like gives you investors enough
context to know what it is, you know, what kind of business you have.
It's also important to ask, are you really selling $2 for $1? Like is your business model
is like a losing model? So those are a bit more advanced questions. It's better to just
do the market sizing in the beginning, but that's just something to keep in mind. And
when asked here from Cal.com, like it's the open source calendar, I don't know if you
know this one, and his top advice, he said that as an open source startup, you actually
need a 10x time. Time is total addressable market. So like the, what I said in 10 years,
100 million. And what he was saying by that is, you know, you're cannibalizing your own
business. If you have a successful open source project, people are going to self-host it.
At least I hope. And that means that you're competing with, you know, the most formidable
competitor. They're always going to be at least as good as you are. And you're going
to lose, right? So you have to understand that some people are not going to buy the,
you know, the extra paid product. And that's important to keep in mind.
I asked Nick from QuestDB, like his perspective, and for them, their delay in monetization,
actually not charging money. And that I know, like the reason why I wanted to highlight
this one, is that that's often a point of really cool about startups, like, oh, you
know, this startup is losing like $10 million a year. But what you have to understand is
that there are two kinds of losses. There are the losses that don't make sense, and you're
just burning money for no good reason. And then the losses that are part of a strategy,
like Nick's, which is saying, you know, we're only valuable if we actually have an ecosystem
around us. We're only valuable if people actually use the product. And after that, we can figure
out ways to make money. Or we already know how we're going to make money, but we can
defer that. Okay. Now we can talk about go-to-market.
Again, fancy way of saying getting customers. You know, you have to remember that at the
end of the day, you're a business, and you need to make money. And paying customers are
your business. Again, you can start by non-paying in the beginning, but you need customers.
One common way of thinking about it is if you build it, they will come. It worked in
the past, but it probably not going to work for you. You know, it worked for Linux, because
that was the first open-source operating system. It worked for KDE. It worked for a lot of
Linux distributions. But realistically for you, you're going to have a lot of competition,
and people are most likely, like the market is most likely very saturated. So people are
not just going to show up. So what you can do, though, is do things that
don't scale. Again, as we said earlier, what does that mean? You know people. Ask, you
know, email 200 people from your contact list to try your product. Or you're here at FOSDM.
Just go to a relevant area or relevant dev room and just chat to people and just ask
them to try your product. There are a lot of easy ways that are definitely not going
to work. That's not how you're going to get to 100 million customers, but that's how you're
going to get to your first stand. And you want to focus on the easy ones, like trying
to sell to Amazon sounds like a very, you know, like, oh my god, they're going to pay
me $10 million a year. That's amazing. But realistically, it's going to take six months
until you get anywhere, and then it's going to fail. But even if it doesn't fail, then
you succeed. It took you a year, and you're probably out of business by the time you even
like managed to scratch the surface on that deal. And again, few that love you are much
better than many who like. Go-to-market is a very common topic with both technical and
open-source developers. The reason why is because we're technical. We don't think about marketing.
We don't think about sales. We don't think about those things. And so a lot of people
had a lot of feedback about that. One, ship as early as possible. Another one, learn marketing.
Another one, you know, if you're trying to sell to companies, maybe start by getting
the individuals at home first, because that's much easier than getting the approval and
the contract and all of that going on. Now that you're kind of like, you're starting
to get customers, you know, there's some traction, you actually have to, you know, have some
metrics. And by metrics, I don't mean Google Analytics and like tracking your customers.
I really just mean like knowing our things are even going the right way. And so, and
also actually like if you know, if you're tracking the important things, you can also
affect them. You can like, oh, revenue is not growing as much as we wanted. I guess we
can, you know, do something about it. And so you really want to track the most important
parts of the business. Often revenue, but you know, some precursor to revenue can be,
you know, can be a good one as well. And it's really easy to go for vanity metrics. Like
one of the founders, I'm not going to put, I didn't put a quote from him, but he said
that they were tracking PyPy downloads. So like the Python package manager. That sounds
great. The problem is, again, like CI, all of those kind of bots, all of those things
actually download packages from there as well. And they thought they had a lot of traction
but actually had nothing. So that's something to keep in mind. So there's some good metrics
that you can use. You know, revenue is always king. If you're making money, great. But also
a number of customers using you in production. So a few big companies that everyone knows
are already using you to, you know, to serve millions of customers. That's something. Even
if you're not making money now, you can probably make money later. Some insufficient ones are
GitHub stars, signups, downloads, Twitter followers. You know, a GitHub star is really
just someone clicked a button. Maybe that someone is a target customer, maybe not. Signups,
maybe they signed up and then they dropped because they realized it's not even the product
that they want. They're like a lot of really false signals here. And also, GitHub stars
don't mean that you have a great business. So this one has like 240,000 stars, like one
of the top star repos. But it's a set of tutorials. And maybe it's a great business. I don't know.
They can spin it into something. But it's definitely not a business on its face value.
But a lot of stars can definitely indicate that you're onto something. Again, this is
from Superbase. They're at 40,000 stars and they're just growing like crazy every year
consistently for two years, I guess. That's something. And that's just like an indication
of the market share that they're gaining with the developers. So I guess the main question
that we need to ask is whether we should even open source. I talked about all of that. And
before you boom me off stage, I know this is not the right place to ask this question.
But you have to understand it's actually a business decision. At the end of the day,
you took money from investors. You promised them to return them more money. You got people
on board, offered them a job and told them that you're going to be around for five years.
So you have to make the best decision for your business. And there are reasons for both
doing it and not doing it. And so one thing is your customers even care. Maybe they don't
even know what open source is. I don't even know. I don't want to go with some cliche,
but they just have no idea what open source is and they couldn't care less. Is there a
business advantage to be in open source? So for example, when you're a developer tool,
that means that people can try your product more easily. That's great. Maybe go open source.
And does it even make businesses? You're just going to cut yourself. You're going to just
kill your own business. So ideology is fine. I've done it for ideology as well with Etisink.
It started as an open source project. But you just have to remember that at the end of
the day, you're building a business. So they're definitely upsides. Engaged community really
helps. Again, so many volunteers outside handing out flyers about projects, really promoting
them. And you can also hire from the community. No need to find great developers if you already
have developers that know your code base and been contributing code. Increase trust. Healthy
communication that comes with open source. Easier adoption, as I said, with DevTools.
And also the product is just more flexible. People can just fork it and adjust it to whatever
they need. They're also downsides though. Balance the community and business needs.
Does this one go to the open source product or does this stay as a priority extension?
Getting a burnout is a good topic. It's a very front of mind topic for a lot of people
nowadays and it's absolutely true. And the same with support, right? I mean, people asking
questions about your product on GitHub, you want to make sure you're going to give them
the best support possible. But they're not paying you in the end. So you're doing a lot
of free support, which is fine. It's part of being a project, but also it can be overwhelming
at times. It's really harder to say no to things because everything is in the open.
And also startups win on speed. You really have to compete and move fast. And enabling
self-hosting and doing database migration, seamless migration, all of those kind of things
just makes things so much harder. And maintaining two core bases, which you have to do because
you're going to have customizations for specific customers or you're going to have hacks for
specific customers. You're going to have a ticketing system where you're going to say,
well, you know, customer X asks for this. We have to finish it now. You're not going
to be able to do that in the open just because your customers wouldn't want that. And also
your secret sauce may be public. And you're really just undercutting yourself on price.
You're looking to self-host. So there are downsides. Another quote that I like is by
Joseph Jax. He said don't open source something you don't want to commoditize because you're
open sourcing your secret sauce. You're open sourcing all of the internal structure. It's
actually really easy to mimic or even fork, but definitely to mimic what you're building.
So just assume it's a commodity the moment you release it and make sure that the stuff
that you don't want to be a commodity, they stay proprietary. Okay. So now we can talk
about fundraising. I know this is something that people are often mystified by even just
by the amount of people that asked me about it in the last 48 hours alone. So happy to
cover a bit of it. So the first thing is that you're dealing with investors. And when you're
dealing with people, you have to understand what do they actually care about and understand
how they think. So the first thing to understand is the power law venture capital investments.
What does that mean? Let's assume for simplicity that a fund invests in 100 companies. Most
startups fail. So that means 90 are going to fail. And they invest a million in each.
So 90 are going to fail. Okay. They already lost $90 million. And now they have 10 live
companies. Let's say five of them are going to return, sorry, eight of them are going
to return 5X. Okay. That's a good outcome. They invested for a certain amount of money.
It's now worth 5X that amount. Great return. So that's $40 million that they made. And
then the last two, so they lost 90. They just made 40. So they're down 50. So the last two,
the last two companies really need to carry the whole weight of the whole investment fund
to actually make a return. So that means the last two probably need to return 100X each.
So if they invested a value of 10 million, it needs to be worth a billion now. And it's
really the old venture model is based on the fact they're trying to find these one or two
companies in their whole fund that is going to be 100X. Facebook was a 2000X or something
like that. Uber as well. They're companies that are definitely outliers. Apple as well
if you look at the whole 30 years at a time. So the moment to understand that they don't
care about your 5X, because that 5X was $40 million out of the 240 that they made, you
really have to position yourself as that 100X. And you also have to understand that they
have investors. So even though you're talking to that person and they love what you're doing
and they're open source developers themselves, they really want the product, whatever, they
have investors to answer for. They told them, hey, I'm going to invest your money and I'm
going to give you that amount of return. So really, you have to make sure to understand
that dynamic. It's also, it's their job. I mean, here I wrote, you know, stay in touch,
but really it's their job to waste your time. And they want to like meet you. They want
to like know more about the space because they're going to invest in a competitor and
they really want to understand the space better. They want to know about all the cool companies
so they can tell their friends at the country club that, I mean, that was maybe a bit of
an extreme joke, but they want to tell their friends that they've talked to all of these
cool companies that are just doing very well now. This is not your job. Your job is to
build a company, not to waste your time talking to investors. And another thing to remember
is that not a yes is a no. So investors want to invest in the really good companies. As
I said, they want to invest in the hundred extra. It's really hard to know if this company
is that. So what they're going to say, they're not going to say, well, no, this is stupid.
I'm not going to invest in you. What they're going to say is like, oh my God, this sounds
amazing. I need to build my conviction for a few weeks and I'm going to like do some
research and I'm going to like talk to you then and then they disappear. But if they
see that some big name investor is talking to you or there's some traction there, then
they're going to come back and complain to you and say, well, I told you I was interested.
But really what they said in the beginning was no and you're never going to hear back
from them again. So it's really important to count that as a no and not to count that
as a yes. And another thing is that you want to believe the no, but not the why. So again,
they want to invest in you, maybe not even in this company, but maybe in your next company,
but they want to invest in the best companies. And if they're going to tell you, you suck,
you're not going to talk to them the next time. So they're really going to say something
nice like, oh, you know, this is, you know, our fund is like slowing down its investment
so that really this is not the right time for us. But like, let's chat again in a couple
of months. Really what they mean by that is leave me alone. I don't want to invest.
And so like don't like, don't count it as a yes in a couple of months. Just count it
as a no, essentially. Also like everything, it's a business. You want to have a plan.
How much are you going to raise? What are you going to actually do with the money? Like,
you know, it sounds good. I'm going to raise $2 million, but are you going to hire people?
What are those people going to achieve? You know, figure those things out. How much of
the money are you willing to sell? Are you willing to sell 90% of the company for $1
million? Are you willing to send 10? Those are all questions that you have to come in
prepared for because you're dealing with professional negotiators that are going to rip you to
shreds if you don't have like a strong stance on any of those. Another thing is to speak
to investors all at once. So investors talk, as I mentioned, and they will talk about the
cool companies that are chatting with. And if they're going to see that you've been talking
to investors for the last year and you haven't raised around yet, that probably means you're
tainted goods and they're not going to want to invest in you as well. So the right thing
to do is probably try to invest money, like raise capital for like two, three months,
and after that, if that doesn't work out, just stop, go back to building your business.
If you're a developer, you probably don't need that money anyway. You can just continue
building the product and then come back stronger in a few months. I'm going to rush this one
a bit, but if you want to find investors, start with angels. Don't chase Sequoia. They're
not going to invest in a small company, or they very rarely do. Don't waste your time.
Build traction with angels, like small checks, and find people that are excited by the space,
invested in similar companies, ask your friends. But really, the most important thing is don't
take intros from investors who haven't invested. Investors want to look good, and again, they
want to look like they know all the companies. So they're going to tell you, hey, I'm going
to introduce you. I know a guy, Sequoia. I'm going to introduce you to him. I know a girl.
They're that fun. But really what happens is that if they haven't invested in you themselves,
they're just signals to Sequoia that you're tainted goods, because they don't want to
invest in you, so why should they? So that's a really bad strategy to accept those intros.
Just say that you already have enough traction and interest. But once they invest, by all
means, that's the strongest signal. Someone put their money on you, have them introduce,
have them go on a building and shout to the world that they've invested, and get introductions
from them. This is actually where I see founders error the most, not because maybe that's the
most common place for mistakes. It's just a place that I'm exposed to the most, is their
decks and their pitch. You want to really keep it short. You want them asking for more,
not going through 80 pages of boring stuff about whatever. You want to keep it short,
short, 10, maybe 15 slides, really on point. You want to highlight what's most impressive,
and in your case, it's probably team, maybe idea. Maybe if you have a really impressive
set of customers, that's great. Highlight that. But most likely, you don't need to analyze
your $2,000 a month revenue, because again, they don't care about that. It's not something
that they see impressive. So focus on the stuff that are impressive.
Another thing that people often get wrong is they confuse their customers with investors.
So they go to the investor and assume the investor has the problem. The investor actually
really cares about, I don't even know, I don't have an example at the top of my head, but
they really care about this topic, and they understand the problem, and they face it themselves,
and they really feel it. And if you told them about all the research that you've done, about
this product, and how you solve it, they're going to really be interested about that.
The most likely scenario is that they don't even know what you're talking about. It's
not their job to be subject matter experts in whatever it is esoteric thing that you're
building. They just need you to demonstrate that there is a problem. People really care
about that. People are going to pay you money. This is how much money you're going to make.
This is how you're solving it, not necessarily in this order. This is who you are and why
you're the best person or best team to solve it.
And obviously, you want to know your business inside out. You want to be concise, so let
them ask questions, always iterate. Every after every call, I would go back and make
sure that I get better after every call. On the call, be calm, relax, don't look desperate.
You can sense desperation a mile away. When we were fundraising, I knew the worst case,
I'm a developer, I can build a product myself. I don't need their money. I would love to
have it, but I don't need it. That made it possible for me to relax and show that confidence
that they're looking for. You're also assessing them. Ask questions, figure out if you want
to take their money, because you're going to be with them for the long run if they're
going to invest, so that's important. Also, only the CEO should go on calls. Don't
do party conversations. First of all, just distraction, but also, you're going to get
so many noses, and it's much better that less people get pounded with all of these noses,
and the other people can actually focus on the business and continue.
So the deal, this is mostly a side for you to read afterwards, but there are a lot of
topics like, is it simple, is it fast, or are we going to spend 200,000 on lawyers in
this deal? What are the terms for Rata, liquidation preference? All of those kind of things, you
need to understand before you jump on that call, and make sure that what they're offering
is what you're willing to accept. One thing that really grinds my gears, by the way, is
investors that tell you, we invest 500,000. 50% of that is in money, and 50% of that is
in services. So we're going to let you use our office and use our designers. I don't
want your services. I'm going to hire my own designers, and that is such a rip-off if you
ask me, and avoid those if you can. So final notes about fundraising. You only need one
yes. When preparing this talk, I was thinking in my head, how many noses did I get when
fundraising? I thought probably one, two. Then I looked at my notes, it was probably close
to 50, but I really couldn't care less, because that doesn't matter. I only need one yes.
You probably need more than one yes, you're probably going to get a few investors, but
once you get a yes, the flywheel is rolling. Ignore the naysayers, ignore the assholes,
you're going to meet some really shitty people along the way. They're humans as well, so
just ignore those. Fundraising is definitely not success. Fundraising is definitely not
company building. You need to actually build your company. This is not the end, this is
just the beginning. You may not be able to raise some expectations, be ready for that,
have a plan B, that's absolutely fine as well. As I said, very hard to fire investors, so
watch out who you put in your cap table and who you marry. Another small point is that
many investors only invest in certain locales, so a lot of investors only invest in the US.
That's something to keep in mind. Why a big fan? They find a lot of open-source startups.
They've been transformational for us. I would really consider applying. We got rejected
many times. Don't let it hold you back. There are a lot of great open-source startups, GitLab,
Docker, Superbase, HopeHosog, really the list just goes on and on. You're going to be in
good company. One thing is that you need to be aware of the siren song. The tempting places
where things usually go wrong for people. One place, as I said, fundraising or valuation
or money raise or thinking that talking to an investor is actually success. But again,
no, you need to build your company. Another area that people go wrong is that thinking
that hiring more people is actually success. Managing 20 people. How big is your team?
People ask me that all the time. We're small. The reason why we're small is because that's
what we need to build a kick-ass product. This is something that you need to keep in
mind. Burning money does not equate success. Plain startup does not build a company. Going
to pitch competition, startup conferences, startup meetups, investor chats, all of those
kind of things. Fun. Chasing press as well. Maybe fun. Honestly, probably fun. But it
really just don't mean anything for the bottom line of your business. Just don't do it. Also
remember, you really have not made it. Really don't look focused. The only thing that matters
are customers, product, team and metrics. That's it. Everything else is just noise or
maybe an enabler to get to everything else. So some lessons I personally learned the hard
way is that you're no longer an engineer. I really like coding. That's it. I wake up,
I love coding. And it's really hard to remember that this is not why you raise capital. Like
this is not what my job is at the business anymore. I'm the CEO. I need to do just business
stuff. I can help with the code. I can help with the architecture. But my main time should
be spent on go-to-market. Opportunities are not going to last forever. Just grab them
when you see them. It's very easy to say, I'm just going to perfect this landing page
for a couple more weeks and then I'm going to take this opportunity. But then the opportunity
is going to be gone. We missed a few in the beginning. People are going to be trying to
take advantage of you. So just watch out. You're running a large budget. So just watch
out for those people. Be mindful and protective of your time. So a lot of people are going
to want to chat, catch up, whatever. Great. But as I said, you're going to be working
24 hours. So maybe spare the 25th hour for some fun stuff or maybe more work. And the
last thing is that you really want to surround yourself with optimists. The truth is that
your startup sucks. And it's going to suck for the longest time. So the last thing you
want is people that are negative around you. A few more things. Team, super important.
Early team sets the tone. Bad hires can really derail the company. Great co-founders can
make the difference. I've seen it multiple times. But actually better to start on your
own than having a terrible co-founder, which I've also had. You're really in control of
your destiny. If something isn't working, you can change it. The only thing you cannot
change is the market. But really just iterate, iterate, iterate. You can get lucky. We got
lucky many times. Just put yourself out there. Talk to customers and you're going to notice
something that no one else has and you're going to get lucky. And it's really a game
of persistence. You can't lose unless you stop. Obviously I'm not saying go and bang
your hand against the wall. You have to have some, you know, some acumen there. But as
long as you don't give up, you're going to win. So just a few closing advice. It's very
easy to think that hiring X will fix everything. Or customer X, once we get them, that's it.
The business is going to go crazy. Or maybe this investor is going to change the destiny
of the company. And maybe. Maybe some of them will. But it's really just on to you to actually
fix the company and make it work. And you have to remember everything is sales. So you
have to really get good at it. You want to get customers. You're going to get candidates.
You're going to get investors. You have to sell them on the vision of the company and
the company itself. Some more sources of great advice. YC YouTube channel, library. I mean,
check it out afterwards in the slides. And yeah. And that's it. I just want to give you
like a few closing words before I open the floor for questions. So make sure that it's
really what you want. I mean, I kind of like try to dissuade you a bit in the beginning
because really you need to be, you need to want to start this company even with my dissuasion
there. And the only important things are to talk to your customers and build a product.
Nothing else matters at this stage. You want to build something that people love. You have
to remember it's a business. It's not, you know, not an open source project. It's something
that you have to actually make money. And this is the primer, but there's so much more
to it. And this is just to get you from zero to one. Every stage of the company is different
and there's so much more and like, and maybe conflicting advice once you get to the one
and once you get to the two. And one more thing. It's your job to be the number one
evangelist of the company. And so always be selling. And in that spirit, if you need webhooks
or you want to work at a fast growing startup, yeah, come talk to me about Sviks. And that's
it. Any questions?
Yeah. Sorry, a bit over.
Amazing talk. Thanks a lot.