James Governor's Monkchips

DropSend: how to build a web app business for less than 30k

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 Ryan Carson speaks, in a speech entitled What’s the Big Deal?
OK – I have carped on him a bit today, but the conference is good, and I really like this chap’s mindset. And… lets’d face it: I should not criticise someone for getting things done.
How about being completely transparent about your startup costs? That means all your customers know how big you are and what you spent. No time and materials bullshit… no reason to overcharge. This is declarative living in full effect.
Ryan you did great. Thanks for encouraging Europeans to jump in with both feet. Love the way you say quid.
On that note the 30k above is pounds. That is about 50k in bucks.
So just how much did it cost to set up DropSend?
What’s Enterprise?
mass market 1000+ users
What’s on a budget?
Under $50k
send and store large files

The Most Important Thing

will people pay?

acquisition is not a business model. its lame.

Show Me The Money

branding and UI 5k pounds

development 8.5k pounds

desktop apps 2,750 pounds

further dev – 1.6k

hosting/maintenance- 800 per month

legal 2,630

accounting 500

linux guy 500

misc 2k

trademark 250 quid

merchant account  – 200 quid. Halifax Bank of Scotland will supporting recurring payments…

Payment processor 500

total 25,680

stay in business. think about something small you can do.

The Reality

dont go for rock stars go for quiet talent. find someone you trust, that is not that well known, but is really good.

outsourcing – didn’t work

How To Keep It Cheap?

dont get stationery – spent 1000 pounds. dumb.

No luxuries.

Keep it cheap – use blogs, IM

build scale in at the beginning – what happens when you run out of disk?
shop around: first hosting quote – 12k per month!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Make sure your app is financially viable… pessimism has its place.
Plan to go 10% over budget and three months over schedule.
Holy Crap, Lawyers are expensive
terms of service 1k 
contract for freelancers 800 pounds
privacy policy 15 from clickdocs
barter-offer to build the lawyer’s website

Cheap Software is your friend

Project management – Basecamp

Bug tracker – Trac

version control – subversion


Cheap Hardware

$200 Dell box

How To Not Spend Money on Marketing


word of mouth

is your web app viral

Writing – great way to raise your profile.

Thanks for the information Ryan – that was very valuable info and the warmth of the audience reaction showed it.

I heard someone complain this morning that Josh could say fuggeddabout it – because he just made a bunch of money….

So now we know just how risk is involved. This stuff is nothing new for RedMonk but I know the audience appreciated it. 


  1. if you are really courageous you will ask your large vendor clients a) what their cost base is and why they need the margins the industry strives for b) why they are not dropping dramatically what we seen start ups leveraging for the last few years with cheaper global labor, open source, lowered broadband, VoIP, intel based servers and other costs you write about in your post .

    The bigger vendors eat up 75% of all IT budgets. Till they start showing dramatic efficiencies most of what smaller folks do is well…taking a leak in the wind

    Too many vendor consultants are trying to help vendors preserve their margin and even increase pricing. In a deflationary tech market, vendors need to be reminded their customers are not chumps and can themsleves see the new economics as I wrote here


    The trick is to continue to make preserve margins and revenues through volume increases as prices decline. But prices have been and will continue to go down in most tech categories.

  2. This could be a template for our own business, Tablane Technology (http://www.tablane.com). So far there are two of us, a small handful of trusted, longstanding friends/contractors, and about Euro35K of start-up costs we have covered ourselves. We are fortunate to be in Ireland, where Enterprise Ireland has a scheme to help cover these early costs. We are using our browser as a calling card to create awareness for the on-line service we will introduce in April. Having done things the classic route in my last company (http://www.redfig.com), it’s so refreshing to be doing things in a way where we don’t have to ask permission from people to create our business. We are just doing it, and steadily getting noticed. It’s fun!

  3. thats sort of fair, vinnie. but i would say we’re doing that all the time. every day of operation we ask those questions. supporting OSS – publication themes like Java on the cheap.

    on the other hand what am i supposed to do – say why dont you screw over your shareholders by ruining your margins? by all means lets help enterprise customers to understand the options and how to negotiate. but lets also understand these vendor companies are redmonk clients with shareholders to keep happy. at least they are to redmonk.

    think about what we do before you question our courage, please.

    I am transparent about our client base- but i dont see us as part of the problem. if you do, then so be it.

  4. James, when I said “you” I meant the broad community of analysts, consultants etc who work with vendors. You personally speak your mind so I have no doubt you raise some of the issues I have raised. Most others do not. Pricing is a taboo subject with many vendors.

    Unfortunately so – the myth is lowered pricing (discounting, whatever else you want to call it) leads to lower margins or lowered shareholder value. Infosys market cap is 10X reveunes. Accenture close to 2X, and Accenture rates are much, much higher. Southwest Airlines is the only consistently profitable airline in the US etc etec.

    See my note here about revenues, pricing and margins


    My overall point is economics of the industry have changed dramatically and smaller, newer vendors are built on thsoe economics. Why are the bigger vendors not able to leverage the same, and if they are when are they going to pass them along…

  5. thanks very much for the clarification vinnie. i respect you for raising the issues.

    we always recommend that enterprises screw vendors down on price, and use competitive levers accordingly. its what i call the amdahl mug effect… based on the the way mainframe shops used to keep some amdahl stuff in the office in clear sight when the IBM mainframe salesman came to visit…

  6. The economics of the incumbent vendors are to be found in the analysis of their financial results. The first figures I look at are ‘marketing & selling’ compared to ‘R&D.’ go do the math as our US cousins are fond of saying.

    Today, there is little doubt that in the early stages vendors can make a significant impact through social media.

    This is very different fomr the situation just 5 years ago. Or when Graham Wylie founded Sage. At that time, there was no choice but to throw shedloads of money at marketing. Heck – he told me once how the company threw 75% of year 1 revenue at the problem. Today, you don’t have to.

    But…you do need a big megaphone to get heard. This is where guys like Scoble, James and others fit in nicely. Get a mention on TechCrunch or have Hugh McLeod talk about you and chances are hit rates will soar. So while the requirment to get heard is no different it is the delivery mechanism, along with the attendant costs that has changed the model. But not, it seems, for the incumbents. Not yet anyway. Why? Lots of possible reasons, too many to talk about here. Maybe another day.

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