Founders at Work.pdf

346 Founders at Work
Probably the key inspiration—what actually made me take the leap into
starting Fog Creek—was Philip Greenspun of ArsDigita, who had a particular
business plan that seemed to be working at the time. In the long run, it didn’t
work, because they took venture capital for a consulting business and the consulting
market disappeared. But we looked at ArsDigita and said, “Wow!
They’re doing all this great stuff. But there are a couple of things that I would
do differently.” They had this weird, religious fear of everything Microsoft,
which I thought came from something of a position of ignorance. I don’t want
to say that Microsoft is great, but they said, “We are successful because we don’t
use Microsoft technology.” I thought they were just kind of randomly being
anti-Microsoft. So that was one small thing I was going to change.
A larger thing was that they were developing this product. They had this
idea; they got the consulting and they got the product—which was the ArsDigita
Community System that they were developing alongside it. The theory was that
the product they created would support the consulting, and the consulting
would support the product.
But they thought the product needed to be open source, and we thought,
“That’s nice, but consulting is a business where your revenue is just a multiple
of the number of people you can hire. Software is a business where your revenue
can grow much faster than the people you hire.” If you can make licensing
fees by selling software using the same model as ArsDigita in every way, but just
charging for the ACS, we thought that you would have a steady growth of the
consulting side of the business.
So the idea was that the consulting would grow linearly with the number of
people as you hired more good people that you could rent out as consultants,
and the software business would grow like the hockey curve because, at some
point when it took off, you wouldn’t actually have to hire new people. You could
just make more copies of the software you were selling.
That was the theory. Realistically, it didn’t work, but we were able to suspend
disbelief for long enough to start the company.
Livingston: Who were the founders?
Spolsky: Michael Pryor and I (we were friends from Juno Online Services)
cofounded it in 2000, which was a good move. Probably starting it by myself, I
never would have really had people to bounce ideas off of. I don’t know if it
would have gotten off the ground, really.
So it didn’t work for ArsDigita, and I think they probably think that it didn’t
work for them because the VCs came in and mismanaged it, but actually all the
other businesses that looked like their business failed at the same time. Even
with good management, it’s likely that their consulting business would have collapsed
as ours did at the time. Luckily, we hadn’t grown very much and didn’t
have much consulting business to lose, so we could survive that.
We had, for all intents and purposes, three consulting clients when we
started in September 2000. By February or March, we had none. Other firms
that were building web stuff lost something like 90 percent of their business in
the course of 1 or 2 months. There was a huge dropoff; the consulting market
completely disappeared.