The startup is a curious thing. It represents a huge leap of faith. A full 25% of startups close within the first year of business. If the startup makes it past the first year, by year ten about 7 in 10 will no longer be hanging a shingle.

What is a Startup?
My definition might be a little different than others. Wikipedia says:

A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets. The term became popular internationally during the dot-com bubble when a great number of dot-com companies were founded. A high tech startup company is a startup company specialized in a high tech industry.

My definition is very much coloured by my professional life. I have worked in books (a store that was only a few years old - by the Wikipedia definition it would be a startup), Arts Nonprofits, Drupal shops, an experimental dance company, a theatre road-house, food and drink, and for the media industry. In all cases, they have had a spark of startup-ish-ness. 12 years of technology work impact my view of the startup. I am heavily influenced with my time with Drupal reaching back to 2006 at a "think-tank" meeting in Vancouver. This article will mostly focus on the open-source industry, leaning in the direction the Drupal CMS and its place in startup-land.

I think that a startup can live within another company - it can be an initiative that a long standing organization can pin major investment and hopes in. For example, for the eight years that I worked for a Regional Arts Agency as it's Senior Director of Technology, quite a few Web Based initiatives were started ranging from custom PHP MySQL applications to sites built in Drupal. Some of these initiatives no longer exist. They simply didn't perform in the market and rather than waste resources, they were cut. Each of these initiatives were treated as an independent startup. It was a smart move because it allowed for dispassionate ceasing of operations when a product didn't perform. The Regional System of Arts Organizations are long standing and can't, in and of themselves, be considered startups. However, several of them behave in a very nimble start-up kind of way.

Quite a few nonprofits are starting to act in a more entrepreneurial way - a great example is TechSoup - an organization that has existed since the 1980s but has continually adapted and reinvented itself as the needs of other nonprofits have changed.

My Definition of "Startup"
A startup is a company with a limited operating history or any brand new venture or reinvention of an organization that radically changes the nature of that company. A startup represents risk. Despite that, risks can be minimized by beginning with a good business plan. Even if a startup doesn't plan on going to investors, it is a good idea to write up a short business plan and mission. This may seem silly, but it provides context in which to work and *might* prevent creep outside your core values. The tighter your core values (and the more unique they are provided they serve a market) the more likely you are to succeed.

Like every other industry, there have been many Drupal shops who have gotten large, crashed, and failed. I think pretty much everybody who has been in the Community knows one or two. I certainly do. Interestingly, this also extends to the projects that one might work on behalf of another startup. I think it behooves you, as the vendor, to try and caution your client as to the risks. Over the last few years, in Drupal, I have seen a significant number of projects that were bound for success and quite a few that could logically only fail. The difference between these ventures has often been up-front planning and understanding of a value proposition for the prospective user base. If you can't express your startup's value it probably shouldn't be worked on.

Bootstrapping Your Business
Bootstrapping really refers to building out your startup with a lean budget. Much of the work is done by its owners with sweat equity. It is quite common for startups to be worked on during the evenings and weekends while the owners continue to have a day job.

Bootstrapping in business is to start a business without external help/capital. Startups that bootstrap their business fund development of their company through internal cash flow and are cautious with their expenses. Generally at the start of a venture a small amount of money will be set aside for the bootstrap.

--Wikipedia

Sometimes bootstrapped companies outsource offshore to reduce development costs if the development chops don't live in-house. If you do decide to build your project off shore, be sure that your vision is particularly tight and you have a very specific scope of work that is well defined to avoid confusion. Avoid scope creep at all costs. This will kill you. You can always choose to rapidly iterate using Agile processes after you have brought your product to market.

The Advantages of a CMS
I'm a Drupal guy - so I have my bias. However, using a framework/CMS like Drupal to, at very least, prototype your offering gives the advantage of being able to use existing community code. It reduces your overhead but also can be limiting on a tight budget. You can build custom, use community code straight up, or engage in a hybrid - each with varying levels of expense. However, the advantages to Drupal are pretty clear. You aren't limited to one vendor - there are a plethora of Drupal Developers (though most have little or no bandwidth to spare these days). The community is incredibly strong - roughly 3000 people ended up at Drupalcon SF. You can reuse other people's code. You have a framework to start working with.

It continues to grow year after year after year and some pretty significant sites have opted to use Drupal. Over 500 government sites will be coming online using Drupal in the near future.

Whether you decide to use Drupal, or Joomla!, or Plone, or Rails, or some other platform - engage the community. Immerse yourself in it. It will help feed your success. It will ensure you have options in the event you need a new vendor or just need to find a little extra help.

Be Transparent With Your Employees
If you are fortunate enough to gain enough success to have employees, it is critical that you be transparent with them. ALL startups end up having cash flow problems. If you are open and honest with the people who work for you about the state of the company you will be surprised by the level of loyalty and respect you will gain. To be clear, you will lose some individuals the first time you aren't able to make payroll - but if you ensure they know well in advance this is coming and what you are doing to remedy the situation they are more likely to stay. Ask your employees for advice and help. You'll get it. They will circle the wagons. You will gain trust.

Don't Live Beyond Your Means
Many moons back, when I lived in Canada, the book store chain I worked for grew at a tremendous pace. Stores were opened up in rapid order one after another. Stock levels ballooned. Payroll increased. Rent went through the roof. This was right at the time when the mega-bookstores were starting to take root. Think about the movie You've Got Mail, except the little chain grew by about 500%. The stores were not able to generate enough revenue to cover the costs within a six month period and the company began to implode. This affected many employees in a highly negative way - they lost jobs.

Don't rent space you can't afford because you sense you might impress potential clients. There is plenty of shared office space out there that you can use temporarily for meetings. You can also choose to work in lower rent spaces, at home, and at coffee shops. If you do the latter, be careful of sidejacking. Don't buy office equipment you can't afford. Don't float the company on credit cards. Don't forgo a nice chair from Office depot for a Hermon Miller Aeron. You will fail. You will affect your company in a highly negative way - your employees will leave you. Without this support, your bandwidth radically decreases - your profit withers. If you must travel, do it conservatively - coach flights and economy hotels - avoid the expensive seats. Set yourself a per diem for meals and STICK TO IT.

The last 15 years of my career have been eye opening. I have seen shockingly stupid mistakes and moments of genius that have made the difference between success and failure across probably 100 different organizations I have either worked or for which I have been a vendor. I have watched similar errors and realised similar truths across a wide swath of industries (even though technology is where I personally have landed) in the for profit, non profit, and public sectors.

Drupalcon SF 2010 Group Photo
Photo Credit: Anthony Hall
Licensed under the Creative Commons.