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microisv or startup

August 28, 2007

Lately I find the terms MicroISV and startup often used interchangeable. I don't believe this is correct and it's part of the reason I think there's been a little less interest (enthusiasm perhaps is a better word) in MicroISV's over the past year than we had a few years back.

A big part of which is which is determining your goals. Do you want to run a business with an office, a secretary, 10+ employees? If so that's a startup. It may just be you in the beginning, but if you envision that environment as your endgame then it's a startup. A MicroISV is a very different thing. It's a lifestyle as much as anything else. Are you content making enough money to have a high standard of living, but not enough to have an office of employees? Would you rather run your business than be a manager in it? Are you content sacrificing a higher probability of success for a lower probability of getting rich? If so then you're starting a MicroISV.

This determination is critical yet so many blogs I read seem to be confused on the difference or not have thought about it at all. Without understanding the difference it's hard to plan for your business, choose the right economic model, know the right expenses to incur. For instance, a startup needs to be in or create a market capable of millions of dollars in revenue just to them (the overall market may be larger, but how much can they capture). A startup probably needs a sizable chunk of startup money or at least be active in potential funding options in order to plan for future growth.

A MicroISV is a lifestyle. I recently took a big chunk of HelpSpot's profits and purchased a house. A great investment for a MicroISV, an insane move for a startup. I could have paid a few employees for a year with my down payment. I've paid off all our student loans, credit cards, etc. If I was a startup it would have been much smarter to take every dollar and reinvest in the business, not pull money out to pay personal expenses.

It's not that a MicroISV can't become a larger business, but when that happens it's more of an evolutionary reality than an initial goal of the company. I don't think wanting a startup is a bad thing at all. In fact some people seem built for it, but it's a choice you need to understand going in. I get the feeling some people who go down the startup path (or worse an in between path) are really more cut out to be MicroISV's and would actually be happier following that path.

With all the PR startups have received over the last year I think the benefits of the MicroISV option have been pushed aside. I'd like to see a renewal of MicroISV discussion and activism. There are so many other good examples of successful MicroISV's beyond UserScape (Antair, Gurock Software, Perfect Table Plan come to mind). Let's start spreading the word again.

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