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Does Austin’s Startup Culture Encourage Dreamers?

Austin has a strong startup culture amid a large community of software developers. As part of that culture, there is a lot of talk about entrepreneurship, new ideas for SaaS businesses, and avenues for securing funding. It’s an exciting place to launch a company, and an entrepreneur can plug into the community for new hires, feedback, or even cheer leading. On the flip side, all the talk about hockey stick growth curves and successful products puts pressure on developers and entrepreneurs to succeed now and fuels a sense of failure if your business idea hasn’t yet achieved success. Worse, the disdain held for “lifestyle businesses” means more entrepreneurs dream of an out-of-the-park product rather than growing a small business.

But it’s no secret that 50% of all businesses fail within the first five years. Trying for the one-shot home run product–with or without funding–translates to even higher odds your business will fail. In contrast, taking a service business approach with a breadth of offerings enables you to grow a client base while seeking opportunities from your client work for new software products.

At minimum, you want your business to provide a reasonable income and involve an area of business that excites you. When my daughter started college at CU Boulder (another great town for software startups) last year, I wasn’t thrilled with her choice of major. But when the university’s president addressed the parents in an orientation, he advised us to encourage our kids to follow their passion, because finding work they love would lead to success.

That’s great advice for entrepreneurs, too. Figure out what it is you want to do, then seek the path to get there. I wanted to write code when I started my business, but without a portfolio of past work, nobody was going to hire me to create software for their company. So, I went door to door and sold website services which at least in some way allowed me to write the code I loved.

As we grew, we looked for opportunities to create new yet sometimes woefully unsuccessful products. And we kept on learning and improving both our services and the products that were finding some success. January will mark our 12 year anniversary, and in addition to earning enough for a comfortable lifestyle, I’ve had the pleasure of working with over 500 clients in varied industries, and I’m thrilled to be the developer behind a great ticketing software.

That’s the kind of start-up culture I’d like to see more of here in Austin. Less dreaming and more working at your passion. Because if you can make ends meet and love what you do, finding a path to a moderately successful product is icing on the cake.

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SaaS and the Human Touch

In 11 years running a software development shop, we’ve been lucky enough to create a SaaS product, ThunderTix, now representing over 65% of our revenue. On a small scale, our SaaS product, ThunderTix has reached product/market-fit. In other words, we found real customers willing to pay for our event management and box office service and reached a level of product success that Sean Ellis describes as the state where 40% of users “would be ‘very product market fitdisappointed’ without your product”. Despite the economic downturn, we’ve managed to grow our customer base, residual income, and net profit, while at the same time managing to pare back on our custom software development (and the required staff) that is more support intensive yet less profitable and less enjoyable.

Once we recognized we solved a real need in the event management business (our software allows venues to sell tickets without added–and hated–ticket fees), we gained confidence in bringing our product to market while ironing out the wrinkles any new software business faces. We’ve slogged away for week after week of 80+ hour work weeks bringing our product up to snuff, and our attention to detail and customer commitment has earned outstanding ratings for customer service.

Customer feedback provides an appreciated pat on the back and justification for the long hours we’ve put in, and in the most important metric, we’ve doubled clients year over year. The kudos, rising profits and job satisfaction certainly point to a job well done. Yet I know that our future relies on quantifiable metrics that will help us aim our budget, expertise, and time with accuracy.

That in mind, I’ve been spending time learning more about the numbers that drive decisions for successful startups, and I’m trying to assign values for standard business metrics that measure success: CAC, LTV, churn, gross margin.

My learning suggests that where human touch is involved in the making of a sale, the cost of customer acquisition (CAC) leaps exponentially over a pure web-based service. Yet human touch isn’t something that should be eschewed and quite frankly, it is a requirement for many businesses–for example, retail, medicine, or legal. But in the world of Internet businesses, human touch is considered the evil to be rooted out of any system. Try as we might to find ways to off-load some of the “human component” of our work, it ain’t gonna happen.

In my world, our customers are small venue owners that need to know there is someone on the end of the phone line to help them through a crisis. They want their hands held as they apply for their merchant accounts and gateways. And most of all, they want to feel like they matter.

So while I’ll continue to look at the numbers that drive growth and applaud the occasional web-based sale that occurs without the human touch, I know the biggest driver of our success right now is the fact that I am one member of the human race caring about the business prospects of another human whose business is their life.