Subject: RE: Successful FSBs
From: "Larry M. Augustin" <lma@lmaugustin.com>
Date: Thu, 19 Sep 2002 16:34:33 -0700

> Alan Hudson [mailto:giles@yumetech.com] wrote:
> Larry M. Augustin wrote:
> > I think that the concept of a "lifestyle business" is very important
> > here.  All too often I see businesses where the principals are
making a
> > very good living for themselves, but they would not be able to grow
that
> > business to make a good living for 10 times as many people.  Also,
> > lifestyle businesses are generally a bad investment; there's usually
no
> > way for an investor to make a return.
> >
> Guess it depends if you are an investor.  But if you goal is creating
> open source software while getting paid then...

Yes, but we have frequent discussions on this list about how to raise
money to start FSBs.  Recognizing that a business is a lifestyle
business immediately tells you that raising money from investors is not
an option.

> > There's nothing wrong with that kind of business.  Many people make
a
> > good living with a lifestyle business.  But when discussing FSBs, we
> > need to be clear which we are talking about.  Venture Capitalists
are
> > not going to fund a lifestyle business.  A lifestyle business is
likely
> > to employ 10s, not 100s or 1000s of people.
> >
> Why the focus on Venture capitalists?  Focus on running a business
that
> is profitable on its own.  Expand as you can instead of a big burst
and
> possible bust.

It's not a "focus".  I see a lot of lifestyle FSBs that want to raise
money and want introductions to VCs.  It doesn't work.  A 12 person
business that is profitable on its own may not necessarily be able to
grow into a 50 person business.  It may not work at 50 people.  I see a
lot of people that have 12 person profitable businesses, and want to
raise venture capital because they can't find a way to get to 50 people,
and think that raising money will do it for them.  That's usually not
the case.

> > I'd like to see the discussion focus on non-lifestyle FSBs because I
> > think those are harder to build but ultimately more interesting
because
> > they can employ a significantly larger number of people creating
free
> > software.
> >
>  From a global/technological economic point of view I bet these small
> businesses are vitally important.  I employ 5 folks in my niche
software
> business(3D graphics) that generates a lot of open source(200K+ LOC
last
> year).

They are vitally important.  I think there are a lot of them.  But is
that the future of FSBs?

Are the only "pure" FSBs are lifestyle businesses?

Are the only non-lifestyle FSBs mixed businesses like Sun and IBM?
 
Larry