Notes from "Business of software" [part 1]

Notes taken while reading this interesting book

What to think 'bout strategies for software companies ?

  • To be a product company (high margin during good time - high risk during bad time. For example Microsoft in their early days) or service company (low margin during good time - low risk during bad times. For example outsourcing companies) or hybrid (for example IBM) ?

Selling products can help to get service contract

  • To sell to individual or enterprise ? Sell to mass or niche ?

  • To sell horizontal (broad) or vertical (deep) ?

  • Can you generate recurring revenue to endure in good and bad times ?

  • Do you have plan to target not only "early adopters" but also mainstream users  ? Sometimes you can win "early adopters" by cool technology but then couldn't reach the mass (lack of documents, technical support etc.)

  • To be leader (technical leader or platform leader. Technical leader doesn't always guarantee financial success), follower or complementor (Facebook Apps, Windows application, iPhone apps) ?

Beyond the software factories

  • There should be process in place but not to the extent that it will destroy the creativity and flexibility (same as Pixar)

  • Project Management (leans toward Iterative/Agile instead of Waterfall)

Checklist for successful start-ups

  • Strong management team (meaning execution is more important than idea, same as Pixar)

  • An attractive market: horizontal is easier to grow however vertical is easier for starting. Therefore the preferred way should be starting from vertical then have a way to move to horizontal.

  • A compelling product, services or hybrid

Compelling doesn't just mean advanced technology but also means "what value do they bring to customers that other products/services don't"

  • Strong evidence of customer interest (hmmm, not always, how 'bout Apple ? People do not know what they want until we show them. Either fulfill a need or create a need)

  • A plan to overcome "credibility gap" (customer fear that this new startup will eventually vanish like 90% others and left them with software without any supports)

  • Flexibility in strategy and product offering

  • Potential payoff to investor (e.g. sellout to another firms or go public - IPO. Can refer to existing start-up in a similar field)

We believe (and hence tempt to invest in) what we like or good at, but sometimes we might need to judge the opportunity objectively (meaning : invest in what we believe that it's worthy)


  • Besides PC market, there is another huge potential market : those-who-don't-currently-own-a-PC (~5 billions)


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Jamie Larson