Boring and Small Startups Are Ok Too

This weekend, I had a lengthy discussion with a friend about their startup and the difficulty he was having getting angel funding.  He had presented their thesis and a small demo to four different angels.  The fourth angel might invest – not would, might.  Angels typically look for the essence of an idea and a brief demonstration of it.  They also look for something with legs.  Long ones.

First, without fully describing the solution, it isn’t new and some folks consider it to be a bit boring.  I think he did the right things:  He sized the market, adequately stated how much it would have cost to build, staff, maintain and market.  According to his model, he had enough positive cash flow to start paying back the angel funding at 3X times the investment – with it’s base MVP.

In my friend’s case, he was hopeful and he had collected some great feedback along the way.  Stuff he could use.  On the other hand, he also noted what he felt were some troubling similarities in each meeting. 

What he wanted to do was just start.  He was tapped out financially and so were his friends and family.  To start and tease out additional product values along the way; given that his original product was boring but met a market need that had not fully addressed by any solution provider.

Here were the similar parts in each of the four angel discussions:

Existing players could easily imitate the product’s features.  While this was definitely the case, no one had done it yet.  Perhaps because they weren’t focused on those features (yet.)

There wasn’t enough sex appeal in the product.  The product was in fact boring but still provided value.  I’m not sure if the angels were against the plan because they didn’t want a smallish company to deal with but I suspect this was the case.  Angels prefer to work on larger projects because it makes better use of their time.

The potential market was not big enough for the angels.  The market size was only large enough to demonstrate a gross income of $500 - $700K for each of the first three years.  Given that the founder didn’t anticipate having over three or four employees for the first two years, it was not a big enough opportunity for the angels to consider.

We talked about a few different alternatives:

Partner with a startup in the same space.  Activity seek out someone with an unrelated solution to see if, pardon the expression, two halves don’t make a whole.

Do the startup part-time.  Consider doing it while earning a living elsewhere.  The problem with this is that if he doesn’t stay focused, it’s not worth doing at all – even on a part time basis.  On the positive side, he could accidently tumble upon something that’s next generation or patentable.  If he’s truly interested in the space, this is a viable option.

Post the solution as Open Source with a Company Presence backstop.  See if the solution doesn’t generate enough professional services revenue to create a viable company and then go on to productize any developments that are fit to do so.

Are there any other alternatives he can try?  BTW, I can think of a two startups that seemed boring (at least to me) at the time:  Twitter, LogMeIn