Raise of hands: who wants to start the next 37 Signals, Fog Creek, or even Google? Both of my hands are up and I doubt I’m the only one. Just think of all the creative and interesting software that is being created in garages, basements, and commuter buses out there. While I don’t want to sound too gloomy, I’m afraid the majority of that software won’t see the light of day. I’ve certainly written a lot of code that falls into that category (whether or not it was “creative” or “interesting” is probably arguable :-)

Here’s the thing, I haven’t succeeded in building one of these great companies. My business partner and I are still working on the formula that works for us but we figure we are in the same position that a lot of people are in: we have some great software ideas and want to bring them to market. To that end I found a rather lengthy article at inc.com which dissected the failure of Friendster - once a competitor to MySpace.

There were many lessons/reminders for those of us that have the objectives described above and I thought I would share what I took away. I wonder if anyone might have any comments on some of these ideas or battle scars to share from the perspective of building a software business in today’s environment.

1 - Make sure your software can keep up with the demands of the users

This can mean a lot of things. In Friendster’s case this meant that the software was not written to scale with load or features. I find this particularly interesting because in my experience there is a tendency for some to insist on perfection before release - not only in design but in feature set. On the other extreme is the tendency to just make it work at any cost. The first will guarantee that you never go live because the software will never be perfect. The “make it work” extreme, as proven by Friendster, makes it much more difficult to react once in the reactionary stage of production. Now, the article points out internal conflicts and the company’s failure to address the software problems once identified. Which brings me to the next point.

2 - Think hard about using Venture Capital

For some it’s the allure of having lots of money to throw at a problem. For others, it may just seem like the only way they can stop what they are currently doing, pay the bills, and focus on their business full-time. Whatever the case may be, bringing on VC funding too early proved catastrophic for Friendster as it has for so many others before them.

To use their numbers, 2 hits out of 20 tries are successful. Jonathan Abrams, the founder of Friendster, feels as though most people get VC funding too early. The organization often hasn’t really been established and the product hasn’t matured enough. Assuming the best case, smart and savvy VC execs are brought in to manage the effort and guide the company to extreme profitability. In Friendster’s case, as for many others, an eye on profits from people with little concern for the product rendered the company unable to address the problems associated with number 1 above.

3 - Continue to keep an eye on your Market

While invention can be the mother of necessity, if you originally set out to solve a problem it is a good idea to stay in contact with the market at all times. Monitoring that the problem(s) exist or that the right solution hasn’t changed, is really the only way to continue to provide the level of satisfaction that allowed you to connect to your market in the first place. According to the article, conflicting ideas inside Friendster and a misguided focus led to a distancing from their users as their patterns and interests shifted out from underneath them and right into the laps of MySpace.

This clearly isn’t the only way to do things or an inclusive list of everything one should do. However, you can really plug these 3 ideas into the respective buckets of Business Development, Product Development, and Marketing. I suppose that if you don’t get those right you probably do have problems.

Tags: business, entrepreneur, funding, jobs, startup