The post was originally published in Polish on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.
Software houses want to be like startups – confronting a difficulty on the market, they massively create products that end up in the trash.
Szymon Janiak, Co-Founder and Managing Partner at Czysta3.VC
Software houses commit more and more attempts to create products for the market – unfortunately, many of them result from wrong assumptions and thus are inept. This is clearly illustrated by their answers to an elementary question – Why did you decide to build your own product? Of course, you’ll have to sift out the pitching BS about how they see global potential, have amazing feedback, etc. Only afterward do the real answers begin:
- We made a product for several million (the cost of programmers’ work), but the client did not pay. So we didn’t transfer the copyright and decided to commercialize it ourselves by selling it to the competition.
- We have been running a software house for eight years – we have a stable revenue of 2-5 million (which we cannot exceed), and we decided that it was time for something new.
- Services are boring, we are tired of fighting with customers, – we want to build global products.
There is, of course, more, but these are the most frequent arguments. One shouldn’t buy any of the above because:
To point 1: In this case, there is only code – there is no dedicated team outside of IT, there are no complementary competences in most cases, but there is something that can work. At the end of the day, however, it is the company’s original services that bring money for bread, and they will take up primary attention. Therefore, there will be a lack of proper motivation.
To point 2: If the founders have been running a service company for years and have never gone beyond a certain ceiling, where did they get the idea that they can scale an entirely different type of business? What know-how do they have in this field?
To point 3: A regular business may be boring and repetitive, but… It can give good money, which you most probably won’t see in a startup for years. Moreover, the product can also get boring over time. Above all, however, building a product and service business are two different paths. So why does one suddenly believe that one will know how to do it?
Most people don’t fully realize that the product business is fundamentally different from the service business. That you need to have well-organized marketing and sales, which software houses often lack because they often grow only on the basis of recommendations. By the way, it will stop working when you pivot radically.In all those cases, however, there is a naïve thought that if you get capital from VCs, they will help. Well… No, it won’t work out. Venture capital is a support for business, which can also manage without it, but at a slower pace. So don’t count on someone telling you how to do business. Also, do not expect that money will change much. At the same time, appreciate what you have. Software houses are a great market for building great companies.
The grass is always greener on the other side.
The comment section had to add:
Currently, sales in software houses are one of the main challenges. Today, no one is interested in ‘buying’ programmers as such. Specialization is becoming crucial. The client expects particular experience and knowledge, which enables the software house to not only provide a digital solution, but also understand the client’s business, its specifics, and predict various situations. For example, in the healthcare industry, in order to create software as a medical device (SaMD) products, it is necessary to have ISO 13485 certification and knowledge of the relevant regulations. How about sales, even if we have X years of experience and high qualifications? It still remains extremely difficult. In this case, creating a ‘boxed solution’ aka ‘solution-selling’ meeting the needs of a specific group of customers – e.g. pharmacy, hospitals – can be a way to develop a software house. Regardless, both with services and products, well-planned sales are the basis for success.
– Władysław Ćwirko, Business Development Manager at Revolve Healthcare
Having built a product for yourself as a software house and developed it to a marketable level serves as the best recommendation for future customers.
– Tymek Staworzynski, Chief Education Officer at fit.expert
Szymon Janiak is an investor and a business-driven Managing Director at czysta3.vc, a Venture Capital fund located in Poland. He has over 10 years of experience in the technology sector. Szymon is also a Member of the Supervisory Board at stockbroker Grupa Trinity S.A.
