Fog Creek Software
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How is Fog Creek being funded?

Is it from personal savings or outside investors who aren't  VCs?

I'm interested because, those two methods (along with VC money) are about the only ways I know of for getting money to start a business.  If there's another way, I'd like to cache it away in my personal harddrive of Useful-Stuff-That-Might-Come-In-Handy-Someday (could use a  little refragmenting :) ).

If anyone else knows of other ways of raising capital for business, please share that too.

Thanks,
Crimson

Crimson
Wednesday, June 04, 2003

Fog Creek is profitable.

Joel Spolsky
Wednesday, June 04, 2003

An alternate question, then:

Before Fog Creek turned a profit, how was it funded?  Who paid for the initial development?

Brent P. Newhall
Wednesday, June 04, 2003

I believe it was Joel out of pocket from his M$ money... I could easily be wrong and spreading nasty rumours.

www.MarkTAW.com
Wednesday, June 04, 2003

If you are from New York, you have almost certainly heard of the Spolsky crime family.  Now stop asking questions if you know what's good for you!

Joe Blandy
Wednesday, June 04, 2003

Yes, I hear they blog their enemies to death.

www.MarkTAW.com
Wednesday, June 04, 2003

From personal experience getting a company funded, the best thing you can do is go through life accumulating people who believe and trust in you strongly.  Friends, family, people you've worked with.

Outside of a VC, you're going to get money from people who already know you and have reason to believe in you from past experience.  Most $$$ are going to come because of prior deeds and relationships, not because of your idea.  Your most successful pleas will be "invest in me", not "invest in my business plan".

Think about it.  Do you know people who could come to you and say "I have an idea.  I'd like you to invest $10,000" and you'd actually fork over the money?  Perhaps.  How did that person gain your trust?  Emulate that person.

A few other notes:

- No one cares about your idea, only your business plan.
- If your team only consists of technical expertise, forget about it.
- Be honest about the speculative nature of your endeavor.  If the venture is high-risk, tell your investor.  Make them sign something to the effect of "I know I'm never going to get my money back".
- Legally, it's easier to accept investment from "accredited investors", which means individuals with a net worth exceeding $1M.  Do your homework about this.  You're going into the securities business and there can be SEC implication if you don't do everything correctly.
- Don't accept money from anyone who will suffer a change of lifestyle if they lose it all.
- Don't accept money from anyone who you think might ever sue you personally or bother you with the "so, how's it going" call every week.
- Be yourself.  Your best self, but don't try to lead people into thinking you're something you're not.  Anyone who's smart enough to have accumulated and kept the cash is likely pretty shrewd and will see through you like a 3 dollar bill.

It's rough out there.  If you even need to ask the "how do I get funded" question, you're wasting your time with a VC.  Go for private placement and sell stock in a "C" corporation to people who trust you.

Bill Carlson
Wednesday, June 04, 2003

The few people that I know that started their own business did it with personal funds.  That is, savings, bank loans secured by second mortgages, and working for not much income for a year or so, etc.  None became The Next Netscape, but were profitable for many years.

mackinac
Wednesday, June 04, 2003

Bill's answer is better, but since people are curious about Fog Creek -- we started out on day one with consulting clients. The only cash we needed to start the business was a really tiny amount that I threw in, basically to cover accounts receivable ... I won't say how much but anyone with a couple of credit cards could have done the same.

The consulting business deteriorated after about 6 months due to the tech downturn, but our software sales had ramped up enough to keep our heads above water. Those sales have been growing steadily to the point where we're seriously profitable just from CityDesk + FogBUGZ, so we're turning down consulting engagements which would be a distraction. (Generally I tell people who want to hire us as consultants that we'll do it if it's a big enough deal to justify staffing up for, which hasn't happened yet).

Joel Spolsky
Wednesday, June 04, 2003

On a slightly related topic Joel...

When you have a new point release of both CityDesk and FogBugz there seems to an amount of "noise". You've done pretty well using guerilla marketing (i.e. via this site and the web) - I haven't seen any traditional advertising for the product. The "noise" seems to have faded a bit so how are you finding the sales? Or perhaps, less intrusively, how are sales being created - I'm guessing via word of mouth and customer endorsements?

Walter Rumsby
Wednesday, June 04, 2003

Joel is running a 1/2 page ad in the Programmer's Paradise catalog, I assume this is a freebie in trade for the product reviews you are writing for them.  Those deals are OK, but sales are based on a reseller's discount, and then you have to get the beancounter in charge to cut the check in a reasonable amount of time.

Joel what is your head count is now?

Mitch & Murray (from downtown)
Wednesday, June 04, 2003

Joel Spolsky wrote:
"Those sales have been growing steadily to the point where we're seriously profitable just from CityDesk + FogBUGZ, so we're turning down consulting engagements which would be a distraction."

...and so you're going to refer all those consulting leads right over to your faithful reader Norrick, aren't ya, Joel?  ;)

Norrick
Wednesday, June 04, 2003

Thanks for the response, Joel.  It's reassuring to hear that your sensible approach has worked.

Brent P. Newhall
Thursday, June 05, 2003

Word of mouth prolly. He has a referral program where early adopters could earn something like a 50% commission off of citydesk sales.

He's said that he doesn't want to advertise CityDesk widely because it's not quite ready for prime time. When it is, he'll advertise it widely. Why? becuase it's nearly impossible to shake someone's bad impression of a product.

www.MarkTAW.com
Thursday, June 05, 2003

Also, advertising's expensive.  Fog Creek will need to build up a significant profit stream before it can afford a lot of advertising (or convincing a bank to give them a loan for the advertising).

Brent P. Newhall
Thursday, June 05, 2003

Being in NY prolly won't hurt - just hire someone to go to businesses and sell the thing like the other Content Management companies do.

www.MarkTAW.com
Thursday, June 05, 2003

Don't discount the raving fans and resulting referrals approach.

I know that Perforce is a very successful company with a "no sales" approach, yet with an excellent product and lots of users who move companies and "take the product with them". Obviously they do marketing as well (i.e. ads etc).

Check out:

http://www.iee.org/OnComms/sector/download.cfm?ID=25771549-54DF-4E33-8887AB85EBD0BD52

Robert Cowham
Thursday, June 05, 2003

> lots of users who move companies and "take the product
> with them

That sounds like me. I have a small suite of products that go with me everywhere. Some free, some cheap, all help me do my job.

www.MarkTAW.com
Thursday, June 05, 2003

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