Tim Oren, a partner at the venture capital firm Pacifica Fund, writes about the two-stage software startup. According to Oren, the first stage of the venture should be focused on providing a useful product as cheaply as possible. Oren states,

“many of these efforts will result in a product, or even a feature, rather than a sustainable company…The go-to-market is similarly light. Rather than a sales channel, the venture will buy ad words on Google, promote itself via word of mouth on blogs and via user communities, and penetrate enterprises by pricing low enough to fall within the purchasing power of a department, or even an individual.”

Stage two revolves around venture funding. If stage one has been successful enough to prove that a market exists, venture funding will be necessary to fund development and establish a formal sales channel. The founders may also be able to command a higher valuation than if they had received funding before stage one. But Oren cautions that this valuation may not be as high as expected.

Now that money is no longer being thrown around like it was in the dot com boom, I think we’ll see the trend of more microISVs following the stages as Oren describes. It appears that many small companies are receiving venture funds today with the anticipation of a buyout from an established company being higher than filing an IPO for themselves. Microsoft, Yahoo and Google are always the names most often mentioned. Oren’s post also shows that the practices of most microISVs are slowly becoming the standard way of starting and growing a software company.

via I Am Adam Smith

The Seattle Times has a write up on MaestroSoft, an eight person company that has offered to help anyone sponsoring a tsunami relief effort the capability to set up a secure and fully functional website to accept donations.

A new forum has been set up for developers and companies to post a request to find people interested in beta testing new software releases.

We are still interested in attracting more people to join the microISV LinkedIn network. See this post for more details.

Kevin Dangoor has a post on his blog, Blue Sky On Mars, about implementing a support system up front that will help your product become a success instead of a drain of your time. One of the points he makes, which has been said by many others, is that you should only answer a question once by making use of forums and other online systems where a customer can help themselves.

Wired news has a story about the company Delicious Monster whose Delicious Library software was released in late 2004. Even more intriguing than the $250,000 in sales in the first month after the release is that all 7 staff members used a Seattle coffee shop as their office.

From an interview with Jim Howard, CEO of CrownPeak, by socialTech.com.

A thought for new startups: spending the first six months (and every subsequent six months after that) concentrating on sales is the most important thing you can do. The best salespeople should be the founding executives. Especially in the early months and years, nothing matters more than cash flow, and the only way to generate cash flow is to sell — and you’ve got to do it yourself.

In about 5 years, Handmark Inc. has gone from having 40% of the PDA software market to having to completely reinvent themselves in the face of shifting technology. With the introduction of more robust cell phones, the Blackberry and other “smart phones”, Handmark is now shifting their focus to the wireless market as the PDA market shrinks. In the article on KansasCity.com, Handmark execs tell that they will now focus on distributing software via the wireless network as opposed to brick and mortar stores and that they will be a big player in niche markets as opposed to the more competitive ringtone and entertainment markets.

I’m looking for readers who are interested in contributing to microISV.com by providing a review of the current software wrapping/transaction processing system that you are using. Send me an email using the Submit Information link at the top of the center column if you’d like to participate.

Please provide a brief (one paragraph at most) summary of your review so I can get an idea of what your full review will be like. As always, full credit will go to the author with links back to your website.

Attorney Don Shelkey writes about whether EULA’s are legally enforceable contracts. Like a lot of legal issues, the answer is ‘yes, with some exceptions’.

via J-Walk Blog

37signals, the creators of Basecamp, have launched a new free online app called Ta-da Lists. The application is an excellent example of ’simple but powerful’ and would be a great tool for any microISV.

The original announcement for Ta-da was posted on their blog and immediately got a huge response. The comments are well worth a read and are a great example of raving fans.

Update: Jason Fried of 37signals posts that 2500 people signed up in the first 24 hours Ta-da Lists was available. The original post was the only announcement made.

On his blog, Socialtext CEO Ross Mayfield addresses the loss of Disney as a customer. His post is full of information on competition, market size and innovation. Particularly of interest to developers is this quote.

Developing features is easy, have the wisdom to not develop features is hard. What users really want in this day and age is the power of simplicity.

askNet and Softwrap have partnered to provide what they are calling “a complete end-to-end eCommerce solution” for digital media publishers.

askNet will continue to focus on online stores and order processing while incorporating Softwrap’s software wrapping technology.

Press Release

I’ve posted a new poll to the site asking if you’d rather make $20,000 by selling 1000 copies of your software for $20 or 2000 copies for $10. Please take a moment to vote for your preference.

I’ve also started a thread in the Sales and Marketing forum in the microISV forums to discuss why you prefer one choice over the other.

microISV.com was started to provide an online community where all of us with similar interests can congregate and share and learn. After a few emails, several of us thought it would be good to facilitate networking and communication among the community using LinkedIn.com.

If you’re interested, head over to LinkedIn.com and sign up and send me an invitation. Find me by searching for ‘brian microisv’. My email is brian at you can guess dot com. Be sure to include the word microISV in your Groups and Associations.

Rob has come up with a new and interesting application of the shareware business model. I think he might be onto something, but I wonder how he’ll combat piracy.