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Summary:

Every developer who makes a popular web or mobile app is eventually faced with a decision: They can either stick with the status quo or swing for the fences. These days, many people are taking VC and going big — but is that the right choice?

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Every developer who makes a popular web or mobile app is eventually faced with a decision: They can either stick with the status quo or swing for the fences.

A successful app can provide a nice living for a small team of one or two people. That kind of “lifestyle business” can be an attractive end in itself. But it can be very seductive to take on venture capital, hire a larger staff, and turn an app into a genuine startup. Taking that path is risky — but it also has the potential to bring on much bigger economic rewards.

These days, it seems like more and more developers seem to be swinging for the fences.

Spinning the risk-reward roulette wheel

Buffer is one example. It’s an app that enables users to easily schedule their Tweets to be posted at a later time, and has amassed a sizable user base that is growing every day. Just seven months old, Buffer is currently bringing in enough money for founder Joel Gascoigne and co-founder Leo Widrich to work on the app full-time. But now they want much, much more.

Last month, Gascoigne and Widrich moved from Birmingham, UK to San Francisco to turn the app into a full-on startup. The two men, who began working together while students at the University of Warwick, are now scheduling meetings with potential investors in the hopes of raising up to $500,000 in angel funding.

“We’ve been completely self-funded so far, and we’re making enough money to sustain ourselves. But we’re here to take it to the next level,” Gascoigne told me in a joint interview with Widrich in San Francisco last week. “There’s so much more we want to do.” They have a vision of building Buffer into a sort of “Evernote for social media.” To do so, they plan to add functionality to schedule messages for Facebook and Google+, as well as build out the app’s analytics capabilities.

But for now, Gascoigne is doing all of Buffer’s coding while Widrich handles the marketing and community support. They’re hoping that outside funding will allow them to hire a few more developers to help with those plans.

Aiming high could really pay off

I have to say, it was really invigorating to talk to the Buffer guys — two young entrepreneurs who are taking a risk to come to Silicon Valley and make it big in tech. I usually cover bigger tech companies and more established startups, so it’s fun to have conversations with smart and hungry developers in the earliest stages of building a business.

Stories like Buffer’s are evidence that Silicon Valley’s decades-old status as the epicenter of tech dreams is alive and well. And time and time again, entrepreneurs from Steve Jobs to Tim Westergren have shown that small ideas can grow into big companies — and real financial rewards.

Staying small has its perks

But some critics argue that the “shoot for the stars” mentality that often comes along with bringing on outside funding does not always make sense for every app. MetaFilter founder Matt Haughey put it this way in a recent interview with Willamette Week:

“I’m OK with this lifestyle business. It’s a put-down for a lot of people, especially in Silicon Valley. I think it’s the best thing in the world. You don’t have to kill yourself. I’ve been at startups where we worked 16 hours a day and didn’t get anything out of it. It’s stupid. Geeks who know how to program and make things should be able to make a small thing that runs forever and make $100,000 a year and live off that. I mean, what is wrong with that? It’s an awesome goal.

… It’s like nobody sings unless they want to be Britney Spears. That’s stupid — we should all sing in bars three nights a week if we like it and get paid as professional musicians. Who says you have to be a superstar? I hate the whole ‘rock-star programmer’ thing where you have to make the next Facebook.”

Similarly, Instapaper founder Marco Arment has been very vocal about maintaining his app’s status as a self-sustaining, self-funded entity, even as competitors like ReadItLater opt to go the VC route. As Arment told GigaOM’s Ryan Kim in a recent interview:

“Profitability with a small company and no outside investment is a great place to be, but not everyone’s businesses can sustain that, and it forces constraints… To me, these constraints are a net positive: this is the type of business I want to have.”

One thing is for certain: As more venture capital money continues to flow into the tech industry, more app developers will surely take on funding to go the “superstar” startup route. How that will shake out for those businesses — and the tech industry at large — will only become clear with time.

Roulette wheel photo courtesy of Flickr user cmogle.

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  1. Dino Decespedes Thursday, August 4, 2011

    Nice work! I think more techies need to understand the concept of “get in where you fit in”

  2. Amelia @ International Business Thursday, August 4, 2011

    I really don’t mind if these developers would make a full-blown business out of their apps, but I don’t think either they can survive for a very long time with a very limited apps to offer. Like any other business, they have to innovate, create something different or new, and even target a diverse market.

  3. Arjun Moorthy Friday, August 5, 2011

    The question of whether app developers can sustain themselves on a typical app’s revenue base is one that we’ve talked about at HubSpot. We recently launched our app marketplace and have seen strong adoption of apps thus far. Some hypothesis we’re testing:

    1. If an app. dev. can modify and integrate an existing app with minimal work (< 10 days) it's often worth building an app even with modest adoption. This implies that having more than one venue for the core code is a good idea.

    2. If an app. can be easily created from scratch (<15 days to build; < 30 days to deploy after testing) it's usually worth doing on it's own. This means have a low barrier to entry for developers: great support, API and sample code documentation, dummy data, no developer license, no absurdly long terms to agree to etc. Be flexible on rules for shipping and encourage creativity.

    3. B2B app marketplaces often need far less adoption given the much higher prices customers are willing to pay vs. B2C applications. So, evaluate the adoption you need for that marketplace and at a reasonable price-point.

    Arjun Moorthy

    1. Great points Arjun. Thanks!

    2. Hi Arjun,

      Thanks for your thoughtful comment. HubSpot is a company we have always been looking up to and still do over here at Buffer. Dharmesh is a fantastic person to learn from and Jeanne does an amazing job building a community.

      I love your point on number 2.), this appears to be exactly the space we are in with Buffer. It took us a certain time to develop, we pay close attention to deliver the best support and are about to push our API out as lots of other Apps are interested in a collaboration.

      We are convinced to have a fully fledged businesses that is only going to grow a lot bigger. Thanks for your encouragement!

  4. Really a nice story, for the past few months what all mobiles are fighting about is the applications they offer in there mobile software…However for developers to get more business and money out of apps its need to be innovating, unique and interesting every time…

  5. Great article. I’m definitely swinging for the fences in my [non app-related] business, but I can uderstand the appeal of staying small too.

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