Venture Voice – interviews with entrepreneurs

Entertaining Entrepreneurship

VV Show #56 – Joel Spolsky of Fog Creek Software

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Joel Spolsky first came on Venture Voice over three years ago to discuss his company which he launched in a very different way from most entrepreneurs. Rather than start with the big idea and pay lip service to building a great team, Joel focused on getting great programmers first. The ideas came second. Good thing because his big idea, a content management system called City Desk, never took off. Instead it was his small idea, software to track bugs in other software called FogBugz, that became a cash cow for his company Fog Creek Software. This small idea has provided the funding for his company to expand into three other product lines, all with just $50,000 in seed capital from Joel’s savings account invested when Fog Creek was started. Since we last caught up with Joel, he’s moved into a new office in Lower Manhattan that sports closed offices for all of his programmers and a large area where free lunch is served every day (eat your heart out Google). Listen to how Joel’s expanded his business.

Show sponsor: FreshBooks – an easy online invoicing provider used by Venture Voice

2:25 Original vision for Fog Creek Software (now four products: CopilotFogBugzStack Overflow, and the Joel on Software Job Board) – listen to Joel’s first interview on Venture Voice in 2005

3:35 From content management to bug tracking software

4:35 “Content management was taken over by blog tools.”

5:05 Copilot: remote tech support tool, grew out of an internship project.

6:30 Shifted Copilot from a day pass to a subscriber model

8:00 “FogBugz is the cash cow.”

8:45 On developing products with interns

10:35 Managing many products vs. few

13:40 Copilot today: “growing well… a nice side business”

14:25 Zero marketing: “We’ve experimented with AdWords and never got anywhere… There are certain categories for which it works and a certain category of thing for which it’s a waste of time.”

15:10 FogBugz: Bug tracking and coordination software

15:50 Licensing vs. Software-As-A-Service

17:05 On the fear and need for data security in online services

20:05 “We probably run FogBugz a lot better than our customers can… That is not necessarily true of other software-as-a-service providers.”

21:50 “Because we were a bootstrapped company, we had to reach a certain critical mass before we felt we could host FogBugz at the level of quality our customers expect.”

22:20 If creating FogBugz from scratch today

25:10 “If you’re in a business with network effects, you probably want to get big fast, and that means you want to get outside investment… and you also want to take a lot of risks.”

25:50 “It’s a lot easier to start a software-as-a-service business today.”

26:50 “We don’t try and predict the future.”

29:00 More revenue per user via software-as-a-service.

30:25 The economic downturn hurts new subscriber growth, but current subscribers still pay.

31:40 “As a startup, I would not build something to be installed locally.”

36:35 “We don’t really make deadlines. We just try to estimate when something is going to happen.”

39:50 Stack Overflow: “programmer Q&A website where programmers ask questions and get answers.”

45:55 “I pretty much ignored all of my rules when I built Stack Overflow.”

47:00 600,000 page-views per day, closing in on 300,000 visits per day, that number is doubling every 4 months

51:00 86% of Stack Overflow traffic comes from search, because the site was built for search from the ground up

58:15 On Fog Creek: “We’re the beacon on the hill.”

59:25 On prioritization

59:50 “We don’t have any kind of outside board of advisors.”

1:01:10 Big projects for this year: FogBugz 7, new features in Copilot, Business Software conference, Stack Overflow World Tour, software development documentary

1:07:35 Parting thoughts

1:30 Roots in Journalism, from paper boy to the Associated Press

3:25 “My whole career has been a series of breaks.”

5:20 Covering Woodstock

6:00 Entered Harvard Business School to write about business

6:55 Experiences at The San Francisco Examiner and The Washington Post

12:00 From cub reporter to Editor-In-Chief

16:00 A move into industry at Data Broadcasting, maker of real-time stock quote delivery hardware broadcast over FM radio

18:00 Spun DataSport out of Data Broadcasting, adding sports to the signal during nights and weekends for “displaced fans”

21:30 Raised $500,000 from friends and family, “which I’ll never do again,” and partnered with The Sporting News for branding and marketing

24:40 Last minute feature: betting lines from Vegas, the “lifeblood” of the product

25:20 “So we ended up with a lot of gamblers as our customers.”

25:45 Profit on paper, but running out of cash

26:50 DataSport purchased by Data Broadcasting

29:30 “Skunk works” internet project, DBC Online, building financial websites for newspapers, first client: USA Today

33:00 Spun out DBC Online and opened the site to everyone, monetized via advertising, partnered with CBS to create CBS MarketWatch

36:45 Incubating a new business within an old one

39:00 Pierson, owner of the Financial Times, buys DBC for its share in MarketWatch

42:00 An IPO at the height of the boom: $7M in sales but a $1B market capitalization

50:30 “I was worth $20M on paper that day.”

52:40 Bought Big Charts for $160M with MarketWatch “currency,” i.e. stock, for a second revenue stream and infrastructure

55:10 Big lesson from Big Charts: “have as many revenue streams as you can”

59:40 Sell the news but not the editorial expertise

1:00:20 Licensing news on other sites brought in another revenue stream, which allowed the site to survive the advertising slump

1:01:00 Competition with

1:03:50 “Bloomberg is a fine business and makes a fortune, but they’re a rarity.”

1:05:15 “You need to be in the free universe to be searched, to be all the things that cause you to grow and gain stature in the world today.”

1:08:15 On cash: “Your investors don’t want you to be a bank, they can put their money in a bank.”

1:10:15 On Dow Jones offer: “If they don’t buy us they’re going to compete with us.”

1:11:30 The bidding war for MarketWatch ends in a $528M offer from Dow Jones

1:15:10 “When you get money, you immediately meet people with a lot more money.”

1:18:00 Writing a book on the effect of the internet on not only media but all industries, “what’s happening today is as big as the invention of the printing press”

1:21:40 “The biggest problem is companies trying to protect their business models not their products.”

1:22:25 What’s your ambition now? The book, journalism, teaching, corporate boards and “sharing what I’ve learned”

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