Rod Johnson has lived many a developer's dream, writing software and building a community of likeminded coders that attracted the interest and serious dollars of a major international investor.
The founder of the open source Spring framework for Java sold his business, SpringSource, to virtualisation vendor VMware last year for $US420 million.
So when he offers advice on how to build the next world-beating software business, as he did last week at the Melbourne YOW! developers conference, smart coders take notice.
Johnson's tips spanned the spectrum from management theory, to capital raising and how to dust the cruft out of a project.
- Aim for the cloud Johnson says it's a "fabulous" time to start a software business because you can use the cloud to lower your startup costs and buy skills instead of kit.
- Client, meet SaaS Consider how the growing acceptance of software as a service and the proliferation of devices such as the tablet provide market opportunities.
- Start global Companies such as software tools maker Atlassian prove that there are buyers for your startup's products outside Australia.
- Build a business with focus "I really wish we had had a business plan from the get-go," Johnson says.
- Believe in yourself (but don't be delusional) "The insane complexity of Enterprise Java Beans in the early years" gave Johnson the opening to create Spring. And be your own worst critic: "If you can have one idea, you can have another".
- Prepare for an emotional rollercoaster Success is as testing as failure because it means years of hard work at the expense of hobbies and family and may cut your income at the outset. And it can take a long time to shake off the stigma associated with bankruptcy in Australia if things go pear-shaped.
- Assemble a team Founders should identify their deficiencies to find those who complement their skills and each others'.
- Be capital smart "I'd recommend going as long as possible before raising money" to maintain control over the business's direction, he says. Services businesses shouldn't need other investors but a software business does. Only take on investors after you do background check. And "if you're more than 40 percent diluted on the first round, forget it" because there isn't enough upside no matter how big the company gets. Otherwise, don't fixate on dilution unless it affects control of the company or its ability to retain staff or raise money.
- Get good advice early and often Legal problems are deadly so get the business structure straight at the start. Pay for good accounting and legal advice from the outset and hire a chief financial officer as soon as you need one. One of Johnson's partners dipped out on $1 million in options in a previous venture due to a legal error.
- Do nothing to scare off investors Avoid customer contracts with uncapped liability, disputes between founders, or allowing a customer to dictate your product roadmap.