Socrata

All companies, but especially startups, operate within the constraints of finite resources. Usually the two most precious resources are time and money. Web 2.0 has, in part, encouraged startups to bootstrap and has inspired them to revel in their thriftiness. The 90′s mantra to “get big fast” has been replaced by the more pragmatic exhortation to “get real.” Develop the core feature set and iterate quickly post launch. Sublease office space downtown and commute via public transportation. Buy used Aeron chairs on Craigslist. Use Skype for phone service. The list goes on.

Todays entrepreneurs have gotten real and are doing a great job of managing real cash – the green kind. What I’m not seeing though is strategic opportunity cost management and I’d argue that the success of a startup hinges as much on good opportunity cost management as it does on good physical cash management.

Let’s say you and your co-founder have pulled together $200,000 in startup capital. You each can afford to go without salary for 12 months, after that each of you need $5,000/month to survive. You are a pretty good coder. The other co-founder is an online marketing wiz and product visionary. It feels like you need two really strong software engineers to complete the team in order to launch your service six months from now and catapult your company to success. If you meet that goal, you think you can get revenues up to $25,000/month within 12 months after launching the service. What’s the real constraint in this scenario? What’s the magic number?

Most of you are probably looking for a piece of scratch paper or you’re opening up EditGrid to forecast cash flow out for 18 or 24 months. You’re looking at the wrong variable.

The magic number is 2. That’s how many really good software engineers you need to succeed. That’s the more critical constraint. Hire one mediocre engineer, and you’ve got only one bullet left in the chamber. Shoot that at another so-so programmer and you’ve just ensured failure for your startup. When you’re interviewing candidates, you should not only be asking yourself “is this programmer worth $90,000/year?” but as importantly you should be asking yourself “is this one of the two extraordinary programmers we need to succeed?”

At blist, we’ve been saving our last two bullets for a while. Are you one of those exceptional software engineers who is the difference between success and failure? If so, we’re hiring.

This entry was posted on Wednesday, September 19th, 2007 at 8:07 am and is filed under startup advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.