Some things to consider if you’re deciding whether to be a tech entrepreneur

April 12, 2011 | 1 comment

Ubiquitous computingI was taken by founder Evan Promodou’s post the other day:

Hackers make things; entrepreneurs make things that make things.

This is a pretty succinct explanation of the difference between an entrepreneur and a hacker, and, I must confess, not one I fully understood when we originally set out to build Elgg. (It was implicitly present in my previous projects, and certainly has been in my projects since.)

In short, it’s not enough to build something amazing. Being an entrepreneur is about creating the framework and the platform to let your products take flight in a sustainable way that can grow in value over time. The idea that you should create something that “scratches an itch” – solves a problem that you have – is a myth when considered in isolation. Certainly, building a sustainable, growable enterprise is full of risk, long hours and hard work, so building something that you feel passionate about is a good idea. But it’s also important to feel passionate about the act of building a business, and to understand the implications of taking this task on. Business-building is at least as complex and nuanced as putting together a complex piece of software or a far-reaching web application. It can be more rewarding – for one thing, it makes you more likely to get paid – but it’s a very different task.

Leaders vs developers

Let’s say you’re writing a utility program as a personal project, with some friends. You’ve probably got a good idea of what you think it needs to do, and you’ll write it based on those assumptions. Later on, you might open source it or release it via an app store or the web, and you’ll make changes based on user feedback and bug reports. Ultimately, you and your friends are the gatekeepers for the utility: what you say goes. If you’re selling it, you don’t need to report back to anyone about how well you did.

In contrast, CEOs need to represent company value, and a company board will hold them to doing that (perhaps alongside an advisory board, which in many cases is a good idea as a kind of social proof). In a startup this means not just managing the products, but also having awesome people skills to help your team stay motivated and on-track, being a responsive customer support representative, overseeing marketing, actually getting out and selling your wares, and forming the structure of the company so that all of the above can be done efficiently and in a way that’s fair to everyone involved. Above all, you’ve got to be informed, decisive, empathic, persuasive and a great communicator. And you’ve got to put the needs of your team and the needs of your company first.

In short, being a great leader is not always the same skillset as being a great developer. And neither is necessarily the same as being a great businessperson.

None of which is to say that developers can’t be tech CEOs. Actually, assuming they also have these other skills, they can be great tech company leaders: for one thing, they know what developers need to thrive. The details-orientated, engineering mindset that development demands is also well suited to building a company, as long as this is accompanied by those empathic people skills and a willingness to learn. And in fact, the best developers are informed, decisive, empathic, persuasive, selfless and great communicators.

Consider this, though: Patrick Mackenzie’s Bingo Card Creator is one of the best examples of independent entrepreneurship out there. It’s a great business, and people get a lot of value out of the product – but it’s hardly an engineering challenge. Would you be happy doing the same?

Keep away

Be careful out there

Even when you’re right for the job and have designed a sustainable product, it’s just plain hard to make a business work. The kind of suck-it-and-see entrepreneurship we’ve seen from the likes of Twitter – where companies release grand services and think of the business model later – are the preserve of people with a lot of money behind them. You may be able to get some investment backing, but Twitter had Evan Williams, who had previously sold Pyra Labs to Google; at Facebook, Mark Zuckerberg didn’t come from a wealthy family, but was lucky enough to have great connections at Harvard and a friend in Eduardo Saverin. Even with a solid business model, the risks are large, and software entrepreneurs are disproportionately from wealthy, upper-middle-class backgrounds. (The first round of funding for new companies is often expected to be from friends and family. Could you ask yours for money to start a new venture? I wouldn’t want to.) It’s tough out there, and you’re unlikely to make money in the first few months. You need to be willing to spend money to sustain yourself, without taking unnecessary risks – for example, if you’re in the US, health insurance is not optional, and you always need to have enough money to pay off your debtors and close the company down. Some companies have had really creative solutions to this initial seed funding problem: my favorite is AirBnB’s Obama O’s.

Finally, let’s say you manage to create a sustainable, growing business with awesome products, loyal customers and a happy, dedicated team. Unfortunately, there are lots of entities out there – both people and organizations – who will see you as prey. Some companies exist entirely to make profits through litigation, or by scooping up the assets of failing businesses. Some people see themselves as having a bigger picture view and seek to control a company, perhaps for nefarious reasons, or perhaps through an honest belief that they could do better. These dangers sound cynical, but they’re real, and you need to be able to fend them off.

Know the risks and do it anyway

Why am I posting this? I get worried. I speak to a lot of developers who want financial independence from a day-to-day job, or worse, want to get rich quick, without any realistic ideas about what’s involved or the kinds of things they’ll have to do. The rewards – both emotional and monetary – are potentially great, and I do believe I’ll be starting more companies in the future. This isn’t meant to be a put-off: I definitely urge the entrepreneurial developers reading this who have an idea burning at them to follow it through and put it out there. Nonetheless, it’s not a decision to take lightly, and that’s something that I’m not sure the current set of angel incubators emphasize enough. Do it, but do it with your eyes and ears open.