General Business

How to Build a Company for $12,107.09

I’ve consumed a lot of venture capital starting companies over the years.  Not those insane amounts that you read about, but enough to make me wonder what the hell we did with all that money along the way.  For the last few years, though, I’ve been fascinated with the idea that highly leveraged companies can be started on a shoestring because of the huge array of resources available through the web.  Of course, it’s not only the availability of such resources, it’s the price.  The competition that the same availability creates makes providers very competitive.  You gotta love competition.

The web also breaks many of the old rules about distribution.  While there remain many products and services and a large number of markets that still require real bag-carrying sales and service reps, many products that used to be sold face-to-face can now be sold and delivered virtually.  Yeah, I know.  It seems like this is old news.  I’m surprised, however, with the large number of people who still don’t see it.

In his post titled, By the Numbers: How I built a Web 2.0, User-Generated Content, Citizen Journalism, Long-Tail, Social Media Site for $12,107.09, Guy Kawasaki discusses his efforts to start his new company, Truemors, with about as close to $0 in capital as possible.  It’s a great post with dozens of lessons and pointers about how to leverage the massive resources available to everyone on the web, let alone it’s implicit access to a zillion customers.  Definitely worth checking out. 

6 Comments

  1. It’s important in calculating these costs to include the opportunity cost of all labor (including the founder) if you’re going to understand what is happening. The capital from this has to come from somewhere – in this case, people are giving up cash for equity, so in effect you’re raising capital by paying people with stock (again, including the founder).

  2. It’s important in calculating these costs to include the opportunity cost of all labor (including the founder) if you’re going to understand what is happening. The capital from this has to come from somewhere – in this case, people are giving up cash for equity, so in effect you’re raising capital by paying people with stock (again, including the founder).

  3. The problem is that the number isn’t real. I think it is pretty misleading of Kawasaki to make the claim that $12k is all it took and imply that any entrepreneur can do the same.

    Yes, only $12k was “spent”, but it was Guy Kawasaki spending it. I don’t mean that he is some kind of Warren Buffet-esque genius, but he has access to, and exploited, more marketing leverage than any typical entrepreneur could possibly hope for.

    TechCrunch coverage alone has been enough to get companies started, never mind the rest of the hoopla throughout the blogosphere and beyond.

    It reminds me of the urban legend about Picasso sketching a portrait on the back of a napkin for a persistent fan. When he told her the price was $5000, she was shocked and pointed out that it only took a minute to draw. To which Picasso replied “No, it took me my whole life”.

    In this case, Picasso is an overly kind comparison, but my point remains: almost all companies live or die by their ability to attract customers a.k.a. marketing. Truemors is a blog-bait idea from someone with extensive access to the media. And that kind of access is (a) rare and (b) typically expensive.

    I’m a fan of Kawasaki works such as “The Art of the Start”, but I think it is pretty disingenous of him to actively promote the pretence that that anyone could have started a company just like this for only $12k and had the same level of initial success.

  4. The problem is that the number isn’t real. I think it is pretty misleading of Kawasaki to make the claim that $12k is all it took and imply that any entrepreneur can do the same.

    Yes, only $12k was “spent”, but it was Guy Kawasaki spending it. I don’t mean that he is some kind of Warren Buffet-esque genius, but he has access to, and exploited, more marketing leverage than any typical entrepreneur could possibly hope for.

    TechCrunch coverage alone has been enough to get companies started, never mind the rest of the hoopla throughout the blogosphere and beyond.

    It reminds me of the urban legend about Picasso sketching a portrait on the back of a napkin for a persistent fan. When he told her the price was $5000, she was shocked and pointed out that it only took a minute to draw. To which Picasso replied “No, it took me my whole life”.

    In this case, Picasso is an overly kind comparison, but my point remains: almost all companies live or die by their ability to attract customers a.k.a. marketing. Truemors is a blog-bait idea from someone with extensive access to the media. And that kind of access is (a) rare and (b) typically expensive.

    I’m a fan of Kawasaki works such as “The Art of the Start”, but I think it is pretty disingenous of him to actively promote the pretence that that anyone could have started a company just like this for only $12k and had the same level of initial success.

  5. Dave, Fewquid, excellent points. I totally agree. To put both together, it doesn’t take into account opportunity costs which, for Guy Kawasaki, are quite high. Fewquid, you’re thoughts about GK leveraging his position is right on. Most lesser-known mortals couldn’t have achieved the same goals at twice the cost. Love the Picasso analogy.

  6. Dave, Fewquid, excellent points. I totally agree. To put both together, it doesn’t take into account opportunity costs which, for Guy Kawasaki, are quite high. Fewquid, you’re thoughts about GK leveraging his position is right on. Most lesser-known mortals couldn’t have achieved the same goals at twice the cost. Love the Picasso analogy.

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