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Indie Startups: The Ingredients of Success

November 26th 2016

Indie startups are small businesses that begin as side projects using our free time and spare money. “Garage” businesses is perhaps a more familiar term, one that calls to mind a perhaps more personal dream. They’re the underdogs, the embodiment of the American dream, and the bastions of hope for aspiring entrepreneurs. In this article I analyze the stories of over 40 thriving indie businesses to learn what lead to their success and what the common ingredients are. I’ll show both the graphed data and my personal analysis, but I encourage every reader to draw their own conclusions.

Before we start, I want to give a huge thank you to the work of Courtland Allen, the man behind IndieHackers.com. All my data comes from reading the interviews on IndieHackers, and I can’t recommend enough that you go there and read the stories for yourself. There are nuggets of wisdom and advice strewn throughout the interviews that aren’t captured by the faceless data analyzed here.

Methodology

I gather all my data by reading the interviews available on IndieHackers.com and analyzing each for a number of factors such as the monthly income, type of business, prior experience in the field, type of marketing, etc. I ended up reading through over 40 interviews! I had high hopes of analyzing more features and even more companies, but I greatly underestimated the time investment required for this type of analysis. More exotic features like, “Where did the idea come from?” sound great on the surface, but are challenging to analyze across many companies. Though I didn’t collect hard data for those exotic features, I will cover some of them in a more casual manner in my personal analysis later.

One last thing. For most analysis I’ll show two figures, one which is based on all the businesses studied, and the other on just the most successful. I define the most successful as the top 15 based on monthly revenue. These two sets of data can be compared with one another to see if there is some ingredient unique to the more successful of the bunch.

Numerical Data

Average monthly revenue for all businesses: $19,184 (stddev: $38,829)

Average time to launch for all businesses: 10 weeks

Average time to launch for the most successful: 11 weeks

Graphed Data

Type of Business

NOTE: Any categories not labeled as “for Businesses” are startups who target the general public rather than specifically B2B.

All Businesses
Most Successful

Payment Model

All Businesses
Most Successful

Did the founder have prior experience in the field?

All Businesses
Most Successful

Were advertising campaigns (Google Ads, Twitter Ads, etc) successful?

All Businesses
Most Successful

Did they start by building an MVP (Minimum Viable Product)?

All Businesses
Most Successful

What kind of marketing do they do?

NOTE: This is raw count, rather than percentage.

All Businesses
Most Successful

Do they offer a free plan or trial plan (if applicable)?

All Businesses
Most Successful

Did the founder(s) have a day job?

All Businesses
Most Successful

Payment Processor

NOTE: For any interviews where I could not determine the payment processor, the field is left blank. So really, this is only percentages of companies for which the payment processor is known.

All Businesses
Most Successful

Personal Analysis

It took on average 3 months to go from start to launch, and this remains consistent for the most successful businesses. Variance here is pretty even. Some offerings were released within a week and iterated on. Others were under development for a year and then slowly rolled out to customers.

Most indie startups build services meant to be used by other companies, and there is a slightly higher percentage of B2B services for the most successful startups. About half of businesses build things for the general public, but that’s split between products and services. Plugins aren’t too common, but in my reading I saw that marketing plugins was less challenging. You can be more focused in your marketing and there are usually existing communities built around the product you made the plugin for.

In my opinion, the popularity of B2B makes sense. It’s usually a smaller, but more lucrative customer base, which means you can be more focused with your product. I know from personal experience that when selling into the general public you’ll be faced with a large range of opinions on where to improve your offering. Enterprise customers will either be more consistent, or have the cash to fund development of custom solutions, either of which is a win.

In subscription versus one-time payments (customer pays once for the product, or once per use) there seems to be no consensus. Other models are quite rare (Free, Donation, Contracts, etc). There doesn’t seem to be any difference for the most successful businesses.

Overwhelmingly the founders had prior experience in the field, and even more so for the most successful businesses. Whether they worked in the field, or had a personal need for the product or service, this seems to be a very common factor.

Advertising was only used by half the businesses researched. When it was used it’s a bit common for it to be unsuccessful. Based on my reading, targeted ads tend to be more successful. Twitter or other social platforms tend to perform better than generic Google ads. The common story with Google ads is that it takes a lot of fine tuning before they are worth it. So basically, know your market and target them as closely as possible. That seems obvious, but it was common for companies to run AdWords and get poor results.

Most businesses started with a Minimum Viable Product, and 75% of the most successful businesses used MVPs. This is where, instead of building the full product first, you build a bare bones version that is just enough to work. From there you get feedback and iterate on what’s important. MVPs test your ideas quickly to see if they have merit, rather than wasting a lot of effort for nothing. It also helps focus your attention on what customers actually care about. A common thread among founders’ stories is how much effort they put into communicating with their customers and use that feedback to improve the product. Your customers pay the bills, so your focus should be on making them happy. Another obvious, but easily missed piece of advice. Plus this tight communication builds relationships and tends to lead to word-of-mouth referrals.

The strongest form of marketing was word of mouth. Build great products and people will spread the word for you. Keep in close contact with your customers, and they’ll become your most vocal allies. Second to that is SEO and Content Marketing. Content Marketing is where you write informative articles on a subject related to your business and then mention your company in it with a link back to your website. This non-intrusive, beneficial marketing (when done with taste) is very successful, and helps quickly build your ranking in search engines. It’s fodder that news aggregation sites can pick up on, driving even more traffic to your business, and usually with a long tail of visitors months later.

Besides word of mouth, content marketing, and SEO, the next best tactics include advertisements and cold calling/emailing. Cold calling and emailing are surprising to me, but it makes more sense when you consider that most of these indie startups are built around B2B. The best way to market to other companies appears to be contacting them directly and building a relationship.

The most successful businesses tend to focus on word of mouth and cold calling.

I’d also like to mention ProductHunt, which is the most popular non-traditional marketing option in the data. Lots of these indie startups got their first big boost of customers on ProductHunt.

There is no consensus on whether having a free plan or trial plan for your paid offering is successful. It’s exactly 50/50. Most professional advice I’ve seen mentioned by founders is to not have a free plan, but it is highly dependent on your product and target customers.

The overwhelming majority of indie startups began as a side job or hobby, though that’s a skew introduced by the nature of IndieHackers.com. Founders usually had an existing job or were attending school. Some of these founders found enough success to quit and work full-time at their new startup. The few stories of founders who did not have a full-time job usually center around those who are professional entrepreneurs, or techies who built up enough savings and enough desire to “take a break” from regular jobs.

Finally, I also included a metric for Payment Processor, which I thought was interesting but not terribly important. Of those startups which listed their payment processor, the majority tended to use Stripe with the more successful of the lot tending more towards Braintree. I’m not sure if Braintree is somehow an ingredient to success, and the data is limited, but you’re welcome to make your own conclusions. PayPal tended to be more popular internationally.

Additional Notes

Sometimes features are hard to determine from reading an interview. In those cases I’ll leave the field blank in my spreadsheets, so they don’t count towards the percentages in a graph. This is especially prevalent in the Payment Processor graphs.

A lot of these indie startups got their ideas from outside sources. Friends, co-workers, clients. A few are based around a personal need, but in general it seems that building things for others tends to be more successful. This again might tie into the fact that most of these startups succeed in B2B services. That isn’t to say that you need to target things outside of your experience. The recipe seems to be getting ideas from people around you, and focus on the ones you have experience handling.

The most important factor in any of these successful businesses is marketing, marketing, marketing. Founders will reiterate again and again how they wish they did more marketing or how they’ll do more marketing to achieve their growth goals. It makes sense, but like a lot of these “well, duh” conclusions it doesn’t seem to be common sense in practice. It is a very rare story that someone releases their offering into the world and then sits back while it grows organically. Even in those rare cases of “overnight” success it was still common for an initial marketing effort and iteration based on customer feedback. Face Juggler was a very successful face swapping app which struggled initially for a long time until the creator found just the right set of features and price. After that it spread like wildfire.

It was a common occurrence that founders discovered they were charging too little. Every time they got professional advice regarding their pricing the mentor would say to raise prices. When they did, revenue went up. A nugget of wisdom from my digging: figure out what you think your offering should cost, then multiply by three.

One advantage of having higher prices is that you filter your customer base down to only those who actually care about your product. You’ll get higher quality feedback from someone who’s paying $20/month than someone who’s paying $1/month. And when just starting you’re often strapped for time and attention, so it’s better to have a smaller customer base anyway. Once the product is streamlined you can throw fuel into the fire by lowering prices to reach a broader audience.

Summary

Here is my TL;DR, 1 minute advice based on this research:

Listen to your friends, coworkers, and clients. Find something painful they mentioned that you also have first hand experience with, or that you’ve needed at your job. Package it up so it’s easy to use. Build an MVP, get feedback, iterate. Charge more than you think you should. Listen to your customers. Launch on ProductHunt. Market the hell out of it! Use Content Marketing, reach out to communities, forums, friends, and businesses with cold calls/emails. If you’ve built something great, word of mouth will do its magic. You can do this in your spare time, and probably should.

Conclusion

For me, the biggest question in all this is, can the average entrepreneur be successful? The average monthly revenue of $19,000 is certainly enough to sustain a small company. But IndieHackers.com, the source of this data, is skewed towards success. There are almost no failures on IndieHackers (though I did run into at least one). So perhaps it’s more accurate to say, if you have a successful indie startup, you’ll likely be able to support yourself. But the likelihood of being a successful indie startup is unknown, with the common figure bandied about being a rather gloomy 1-in-10. Can the ingredients from this article improve your odds? Let me know if you’ve found this research helpful.

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