Nine tips to consider when starting a product company

By Art Reisman

I often get asked to help friends,  and friends  of friends, with flushing out their start up idea’s.  Usually they are looking for a cheerleader to build confidence.  Confidence and support are essential part of building a company; however I will not be addressing those aspects here. I am not a good predictor of what might take off, and a marginal motivator at best,  but I do know from many failures as well as successes, the things you will need  to give yourself the best chance of success.    What follows are   just the facts, as I know them.

1) You don’t have much of a chance unless you jump in full time.

If you are not willing to jump into your venture full time, you are stacking the odds against yourself. Going halfway is like running a marathon without training and expecting to win. So be honest with yourself, are your doing this as a hobby or do you expect a business to pop out?  I know the ideal situation is to start as a hobby and when the business grows a bit then go full time,  you can also win the lottery but its not likely.   Even with a unique idea and no obvious competition you are still competing for mind share.  Treating your business as a hobby is akin to studying for a final when you don’t know what is on the test.  To insure a good grade you’ll need to know more than everybody else taking the test which means you need to study hard.

2) If your idea  requires a change in culture or behavior you are less likely to succeed.

There are literally trillions of ideas and things you can do that might be successful given a little energy. Too often I see entrepreneurs stuck on something that requires a change of consumer behavior beyond their control. This is not to say their ideas are bad or that a change in human behavior is not in order. The problem is you will have limited time and resources to promote and market your idea.  The best inventions probe high demand low resistance niches , meaning they fit into a segment where there will little adaption resistance.

I worked with a company that invented a shoe that would allow you to track your children.  One of the  behavioral show stoppers was that you had to put the shoe  in a charger every night.  Who puts their shoes in  a charger? It’s not that it could not be sold with this limitation, but the fact that it required a change in behavior which made  it a much less attractive idea.

Although one might assume that text messaging on phones just happened , from its roots in the Japanese market of the early 1990’s,  it took 10 years to become commonplace in the US. The feature was an add-on to product already in a channel and generating revenue hence it did not require a house bet from existing service providers to bring to market. You most likely will not have this kind channel to leverage for your product, in other words, it takes a special set of circumstances to influence human behavior and be successful.

3) Your idea involves  consulting or support services

If your goal is to get immediate income and become your own boss, then consulting and services are relatively easy to get going in.  Yes you will need to work hard to win over customers and retain them, but realistically if you are  good at what you do,  income will follow . The downside of consulting and support  is that it is very hard to clone your value  and expand beyond your original partners. For this reason, the tips in this article are geared toward bringing a product to market.

4) Sell it to strangers

Hopefully you don’t have too many enemies but the point of this statement is validate your product need. Selling a book to your family and friends through courtesy buys is good for some feedback and worthwhile, but you will never know how your product will fare until you are converting random strangers.  If you can sell to somebody that  hates you personally then you’ll know the product has staying power.

5) Test Market with small samples

The late billy mayes had it down to a science , take almost anything  produce a commerical and sell it to a small market with  a late night TV advertisement. Obviously this validation is only good for home consumer products, but the idea is to test market small.

6) Sell the idea without the goods.

You need to be careful with this one.  The general rule here is, do not under any circumstance take any money unless you  have your product in stock. Either that or fully disclose to potential customers that they are  pre-ordering a product that does not physically exist. If you break these ground rules you will fail. I learned this trick from a friend of mine who wanted to sell Satellite dishes when they first came out. They did not even have a Franchise license, but they took out a small Advertisement in the local paper for Satellite dishes and the response was overwhelming , they just told inquiries they were out of stock ( true statement) and then proceeded to get a Franchise License and follow up with their inquiries.

7) How do you eat an Elephant?

One bite at a time. I define success as selling something , anything and making one dollar, once you have made a dollar you can concentrate on your second dollar. Great if you can go faster, but unless you are really big  now as a company, there will be plenty of time and  space to grow your product into. You don’t need sales offices all over the world that is just a distraction.

8) Ask successful people to help and advise.  Most entrapanuers and business people love to help others get started and if you have a good idea they can help you open doors for oppurtunities but you must ask, and you must be sincere. Everybody loves the underdog and is willing to help. Remember your brother in law, that is a sales rep for Toshiba, is not who I am talking about.  You need to get advice from people who have started companies from scratch. Nothing wrong with brother in law at Toshiba, but the if you are doing a product spend your time getting advice from others who have brought products to marker.

9) Stop worrying about the competition.  Just do what you do best.  You will  often   to differentiate yourself from the competition.  I politely keep the subject on what I know , my product, and how it fits the customers needs.    Never bad mouth a competitor even if you believe them to be scum an astute customer will figure that out for themselves. Let somebody else bad mouth them.

10) I am waiting to be in a better financial situation before I start a  company

Time on this earth is way more valuable than the any dollar you can make. Letting years go by is not a rational option if you intend on doing a product. Your financial needs are likely  an illusion created by others expectations.  If you have to live in trailer without heat to make ends meet while developing your product you can do it. In fact,  the sacrifices you make will be far healthier for your children than that new Nintendo game. It just amazes me how many people will borrow 100k and give it to a school for a childs education while at the same time are afraid of investing in their dream with time and savings.

About the Author:

Art Reisman is  currently CTO and Co-Founder of NetEqualizer. He  has worked at several start up companies over the years , and has invented and brought several technology products to market, both on his own, and with backing of larger corporations.  Including tools for the automotive industry.

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Practical and inspirational tips on bootstrapping

Building a software company from scratch

Building a Software Company from Scratch

By Art Reisman, CEO, CTO, and co-founder of APconnections, Inc.

Adapted from an article first published in and updated with new material in April 2010.

At APconnections, our flagship product, NetEqualizer, is a traffic management and WAN optimization tool. Rather than using compression and caching techniques, NetEqualizer analyzes connections and then doles out bandwidth to them based on preset rules. We look at every connection on the network and compare it to the overall trunk size to determine how to eliminate congestion on the links. NetEqualizer also prevents peer-to-peer traffic from slowing down higher-priority application traffic without shutting down those connections.

When we started the company, we had lots of time, very little cash, some software development skills, and a technology idea.  This article covers a couple of bootstrapping pearls of wisdom that we learned to implement by doing.

Don’t be Afraid to Use Open Source

Using open source technology to develop and commercialize new application software can be an invaluable bootstrapping tool for startup entrepreneurs. It has allowed us to validate new technology with a willing set of early adopters who, in turn, provided us with references and debugging. We used this huge number of early adopters, who love to try open source applications, to legitimize our application.  Further, this large set of commercial “installs” helped us ring out many of the bugs by users who have no grounds to demand perfection.

In addition, we jump-started our products without incurring large development expense. We used open source by starting with technology already in place and extending it, rather than building (or licensing) every piece from scratch.  Using open source code makes at least a portion of our technology publicly available. We use bundling, documentation, and proprietary extensions to make it difficult for larger players to steal our thunder. Proprietary extensions account for over half of development work, but can be protected by copyright.  Afraid of copycats?  In many cases, nothing could be better than to have a large player copy you.  Big players value time-to-market.  If one player clones your work, another may acquire your company to catch up in the market.

The transition from open source users to paying customers is a big jump, requiring traditional sales and marketing. Don’t expect your loyal base of open source beta users to start paying for your product.  However, use testimonials from this critical mass of users to market to paying customers, who are reluctant to be early adopters (see below).

Channels? Use Direct Selling and the Web

Our innovation is a bit of a stretch from existing products, and like most innovations, requires some education of the user.  Much of the early advice we received related to picking a sales channel.  Just sign-up reps, resellers, and distributors and revenues will grow. We found the exact opposite to be true.  Priming channels is expensive.  And, after we pointed the sales channel at customers, closing the sale and supporting the customer fell back on us anyway.  Direct selling is not the path to rapid growth.  But as a bootstrapping tool, direct selling has rewarded us with loyal customers, better margins, and many fewer returns.

We use the Internet to generate hot leads, but we don’t worry about our Google ranking.  The key for us is to get every satisfied customer to post something about our product.  It probably hasn’t improved our Google ratings, but customer comments have surely improved our credibility in the marketplace.

Honest postings to blogs and user groups have significant influence on potential customers.  We explain to each customer how important their posting is to our company.  We often provide them with a link to a user group or appropriate blog.  And, as you know, these blogs stay around forever.  Then, when we encounter new potential customers, we suggest that they Google our “brand name” and blog, which always generates a slew of testimonials. (Check out our Web site to see some of the ways we use testimonials.)


Using open source code and direct sales are surely out-of-step with popular ideas for growing technology companies, especially those funded by equity investors.  But, they worked very well for us as we grew our company with limited resources to positive cash flow and beyond.

Here are some notes on what type product to create. Obviously, you’ll want to do something you are passionate about, otherwise there is no sense in even getting started.  If you are passionate about more than one thing remember this:  trying  to sell product on value, to IT people or engineering types, is much harder than selling to other Entrepreneurs or sales people.  Technical people are generally skeptical about new claims of something working well.  Also, unless somebody asks, they often really don’t tell many other people about the product they bought and the value they are receiving from it.

Looking for a peer group to get some advice from?  Find a local software group that you can join.  If you are in the Denver area,  I would recommend trying

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