Cost of startup
I’ve been talking with a co-worker who is trying to start his own Internet based business. His business will be typetribe.com when it grows up, but right now it is still in the idea/development stage. This got me to thinking about the cost of starting up a business like this.
I am a software engineer for a very large company that makes airplanes. I also do a lot of side work with web applications using Ruby on Rails and other technologies. I must say I am good at what I do and am very proficient.
If I were to startup a business like typetribe.com I could easily do almost all of the work without any external costs. I can do the development, design, engineering, scheduling, testing, security, and so on all myself. If I decide that I no longer want to continue, I can simply stop without any loss of investment except for my own time. If it succeeds and starts making income, the income is immediately profit. Any costs are negligible and can take advantage of cheap hosting like slicehost.com or scalable service such as Amazon Web Services.
However, for Jamey, he has no software engineering training and must rely on external people to get his business idea off the ground. To get started, he has to find investors (or put up his own capital), raise funds, find developers and designers, pay everyone, and if he’s lucky he may have found the right combination of people and have a working web business. Cash flow immediately goes to repay investors and employees. Changes to the web site and ongoing maintenance will continue to drain profit.
Does he have a chance? Sure. But he does have a definite disadvantage. His idea is great and I wish I had the time to work with him on the project. But it is interesting to see how much energy and momentum has to be built up to get an idea like this off the ground.
