Solo Entrepreneurs: Big Bucks From Tiny Computing Startups
One-person companies are earning upward of $1 million in revenue annually. How do they do it? With high-speed Internet connectivity, mobile apps, automation, and a little help from their customers.
Lifestyle Businesses Scale Up, Or Down, As Needed
It comes down to priorities, said Guy Kawasaki, managing director of Garage.com, a seed- and early-stage venture capital firm. Naturally, a lot of entrepreneurs aim to grow, admitted Kawasaki. "Given the choice, I think most of them would love to be a Larry or a Sergey or a Bill," he said. "But, obviously, that's not going to happen for everyone. There are only 500 companies in the Fortune 500."
Ramu Yalamanchi, CEO of Hi5
Still, said Kawasaki, there are plenty of people without that kind of long-term goal. "What if you had a really great French restaurant: Would you necessarily want to franchise it?" he asked. "What would make you happiest in the long run? Those are the kinds of questions that many lifestyle entrepreneurs are asking themselves now that they have the Web and mobile technologies to support them." And the financial barriers for one person to start and run a company have come way down. "You used to need $1 million to jumpstart a business with large revenue potential," Kawasaki pointed out. "You had to buy $100,000 software from Oracle, and pay three people for 12 months of programming, plus have sufficient funds for all the management and administrative costs and physical infrastructure required. Now, technological innovation coupled with offshore outsourcing has reduced that figure to $10,000 or even less."
Ramu Yalamanchi, CEO of Hi5, one of the fastest-growing social networking sites, with an international user base of 70 million, which is consistently ranked as of the 10 most-trafficked Web sites in the world, chose to go in the other direction. He and his three partners made a conscious decision that they wanted to grow aggressively and build a big company. Currently at 50 employees, and profitable since its first year in business, Hi5 is on track for expanding, both in terms of employees and revenue, said Yalamanchi.
"A lot of people who pursue these lifestyle businesses do it to avoid going into management," he said. "We were lucky -- everyone on our core team was interested in growing their leadership skills." Ironically, he says, whereas people who run one- or two-person businesses want to avoid managing even a few employees, most of them end up having to manage crowds of thousands -- if not tens of thousands -- of users, as a way of keeping their operations going." (See "With a Little Help From Our Friends.") It's a different skill set, said Yalamanchi, "but a skill set nonetheless."
Bradbury, like many small software companies, early on stopped responding to individual emails from customers needing help. "It was just way too much," he said. "I would have spent all my time on support." Instead, he established user forums and when a question came up, would post his answer for everyone to see. Users naturally pitched in as well, but Bradbury hadn't realized how much he could depend on his user community until taking his first vacation in years. "I deliberately didn't take my cell phone or my computer, and was truly terrified as to what I would find in terms of support demands," he said. "Instead, I found out that all my users had already answered them."
"The risk in such cases is, at what point does the community say, 'why are we doing all the work? This doesn't provide much value to us,'" said Loier. "If the 'group-sourcing' aspect of an enterprise is not handled well, the business could lose a major business asset."
Many people believe that there will be an explosion of high-revenue no-people businesses in the coming months and years. A major part of this is simply due to the expectations of younger workers who are just entering the job marketplace.
"There are a ton of people who would be very happy to be on their own, working for no one but themselves," said Kawasaki. "And to do this while pulling in $1 million a year? "For many people, that would be the perfect life," Kawasaki said.
"There's an entire generation of workers coming into the business world who have no intention of working 20 years for other people," agreed Loier. "They're the offspring of the first major wave of independent home workers and telecommuters, and they have grown up assuming that their work lives will contain a great deal of autonomy and independence."
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