How to shoot a bullet through your startup

Are you thinking about starting a company in the web space? Step one, don’t listen to Business 2.0 and their How to build a Bulletproof Startup nonsense!

They’ll tell you that you need to burn between $1.6 and $4.5 million to get to launch. They’re wrong. They’ll tell you that working on a prototype is about drawings and photoshop abstractions, that you need advisory boards, big staffs, and a huge lawyer tab before you get to building something real. They’re wrong.

The web is no longer a category that’s useful to lump together with all other sorts of businesses. Prudent advice for getting ready to produce real widgets is likely to be exactly the opposite of what’s sensible for starting a new web service. The cost structure is entirely different, the agility is entirely different, and the priorities should be totally different too.

Let me just cherry pick a few of the silliest pieces of advice:

• To develop a beta you’ll need a T-1 broadband connection and enterprise-strength email…
• Although it’s shrewd to source talent globally, your core product-development team should be local
• The assumption these days is that software and Web companies should break even after $20 million in investment
• A rule of thumb is that a company should have about 20 employees at the time of launch

So to recap. First you blow some $3 million getting the product ready to ship, then fuel the flaming payroll to 20 heads, and finally you expect to burn through another $17 million before you’re at BREAK EVEN. Not a profit, just break even. What a freaking depressing scenario to set up as supposedly best practice.

People often ask us “what should I do to build a company like 37signals?”. I think we finally have a succinct answer now: Do exactly the opposite of what Business 2.0 tells you to.