The Bootstrapped, Scalable Start-up: Charlie vs. Ted

October 23, 2009 – 1:21 pm | by Matt Ackerson

Charlie and Ted are two web entrepreneurs, equal in brain power and wit.

Chapter 1: Background Stats

  • Charlie’s company, Charlie Inc., has hired 4 employees and has $100,000 of his own money in start-up capital; Ted Inc. has brought on board one business partner to work on the tech side of things and has $1,000 in capital.
  • Charlie Inc. and Ted Inc. both have the same web-based B2B product idea, called Digi-Widgets.
  • Their target customers are small to medium sized businesses (SMB’s)
  • This is Charlie’s first start-up, while this is Ted’s second (his first one failed)
  • Both Charlie and Ted happen to start work on their businesses at the exact same moment on the exact same day…

And they’re off!

Chapter 2: First Steps

Ted:

  1. Sets up a make-shift office in his apartment with his business partner.
  2. Talks to several customers about his product idea.
  3. Designs and sketches what the Digi-Widgets will look like.
  4. Asks for feedback.
  5. Tries to identify the problem being solved.
  6. Asks customers to quantify, in some way, the problem, if it exists.
  7. Creates a crude version of the Digi-Widget for customers to use for free.
  8. Collects feedback to make changes.
  9. Makes changes; unfortunately they don’t have the time or the resources to implement all the features they wanted.
  10. After 2 months of hard work, he begins charging $100 per Digi-Widget; 10 customers sign-up.

Charlie:

  1. Rents a cheap office for him and his team for $2,500/ month.
  2. Pays a modest salary to himself and each of his four employees ($10,000/ month).
  3. Charlie and his team set to work building version 1 of the Digi-Widgets.
  4. They work with their heads down for 3 months.
  5. Charlie in the meantime initiates talks with potential angel investors.
  6. Charlie also occasionally goes out and gathers testimonial quotes from potential customers about why they might buy the Digi-Widgets.
  7. Builds a few strong relationships with several customers.
  8. The 1st version of the Digi-Widget is delivered a month late, but it has all the key features.
  9. Customers start using the service for free for 1 month.
  10. Makes some changes based on customer feedback and starts charging $75 per Digi-Widget; 4 customers sign-up.

Who will succeed? Both? Neither?

Tune-in tomorrow for the exciting conclusion!

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  1. One Response to “The Bootstrapped, Scalable Start-up: Charlie vs. Ted”

  2. By John Exley on Oct 26, 2009 | Reply

    Matt, I think this is another great example of your creativity! Nice idea for a blog.

    I think Charlie seems to followed a recipe to succeed, however as you know the ‘game’ of entrepreneurship is incredibly difficult to predict! I love how Charlie offers his product free for the 1st month.

    The ‘freemium’ (sp?) business model is one that I think has more promise, as it removes obstacles and risk for the buyer/potential customer.

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