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Build it or buy it?  Which should your #startup do?

7/16/2015

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Hoping to accelerate the time to get his service business going live,  one of the entrepreneurs I'm working with recently asked me whether he should have developers build software, find a third party who could deliver something sooner, or find open source software that the developers could customize. 

Of course, I said it depends. 

Obviously it depends on cost versus the benefit of time to market, but there are other considerations including impact on your staff, your support plans, and perhaps most important, your exit strategy. 

Although most entrepreneurs are faced with this decision at some point and most have no problem making a good decision, I thought I'd jot down a few considerations just in case there's something you might not have thought of. 

Build it yourself

I must admit that in all of my companies, we built our own products.  This was largely because our initial products were 'under the covers' - inside operating systems and invisible to users.  At the time, there really weren't any off-the-shelf solutions that we could use as the basis for what we were building.  In fact, most of our products were these tools that others could use to build their products. 

This approach worked well for us for the following reasons:

  • We had complete control over the features and implementation of the products.
  • We understood the products completely so our support efforts were reduced.
  • Because of our modular development, the products were easy to enhance.
  • At the time of our exits, there were no questions about the ownership or licensing of our products
Of course we had to pay for development and it took more time to get to market, but for us, this approach worked out well.

Using Open Source Software

In my last company, we moved from tools to end-user products and since we weren't the strongest in building beautiful user interfaces, we took advantage of publicly available open source software that was subject to the GNU public license (GPL).  This sped up our development substantially, and since we had a solid proprietary base, the addition of the open source code presented little risk to our products.  We kept the code modularly separate from our main code so we were able to avoid some of the more restrictive aspects of the GPL.  The main advantages to this approach were:

  • It saved us a lot of development time.
  • The code was open source so we could change and modify it at will - we had complete control over the code.
  • The user community helped us with support issues.
  • It was free.
The way we handled it presented minimal risks, but there were disadvantages:

  • The GPL required us to publish and make available all changes we made to the code.
  • There were some occasions where the user community couldn't help us with support issues.
  • Upon acquisition, the acquiring company had to do a careful examination of all GPL code we used, the changes, and the interfaces to our core software.  They needed to ensure that there was no exposure to their products which would incorporate ours.
Because we were careful and knowledgeable in how we used the open source code, it worked to our advantage, advancing our time to market while preserving our control of the code, and presented only minor issues during our exit (acquisition).

Buying/licensing from a third party

Although we never bought components from a 3rd party to incorporate into our products, we were one of the third parties that sold components and tools to others to help them get to market quicker.  Our products were closed to the buyers.  That is, they bought functionality and we provided external interfaces.  We never supplied source code and they never needed it. 

From our perspective (and theirs since they paid us), buying from us had the following advantages:
  • Very rapid time to market.
  • A professional organization who guaranteed responsive support.
  • No requirement to hire expertise they didn't have or want to have longer term.
As it turned out, well more than half of our customers were acquired by larger companies.  Because we had assignment clauses for our licenses with clear explanations of what that meant in terms of fees and rights, all of these deals went off without a hitch.  And of course, we were happy to welcome these much larger companies as our new customers. 

So, if you're faced with the choice of build it yourself, use open source, or buy from a third party, each can work:

Build it yourself if you have the expertise and can afford to take the time to debug before getting the product/service to market.

If you need quicker time to market and have some expertise in-house, try for open source.  Be sure to keep the open source separate from other components of your offering if at all possible and to follow the GPL rules about publishing.

If you need to get to market as soon as possible, and don't have a lot of expertise in development, consider licensing from a third party.  They can give you a leg up.  Ensure that you have solid enforceable agreements for customization and support, and that assignment clauses are clear and wouldn't scare off a potential acquirer.  Also, vigorously negotiate the license fees.  Most companies are more flexible than you might imagine and many are willing to 'invest' in new ventures for back-end payments upon success.  If possible, get source code/designs.  In the worst case, ask for an escrow in case the company should go out of business. 

But whether you make it yourself, get a leg up from open source, or license a product, ultimately the packaging and presentation is yours.  You're also the face on the support.  From the public's point of view, this is your product/service.  Own it!
First Startup Post
#Startup - When Should you Throw in the Towel?
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Dare Brittany! Finistere, Morlaix, Perros Guirec.

7/14/2015

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PicturePouldreuzic and Perros Guirec
Dare Brittany!  That's the motto that the tourist boards are promoting in Brittany, France.  And from our experiences there, we understand where they're coming from.  Brittany is unique.  It's more rugged.  The people are tougher.  Even the bread is heartier.

Like the Basques from our favorite region of France, the Bretons had a longstanding separatist movement and still maintain their own language.  Many of the road signs are in two languages.

While Quiberon is in Brittany and fascinated us with its varied coastline and nearby prehistory, I don't think we were quite prepared for Finistere.   It was much more stark than we had imagined - almost bleak.   I had heard a lot about La Torche, the surf break with its famous Ascenseur (Elevator) - a current that runs at up to 8 miles per hour and is great for propelling you back to the lineup but we really weren't expecting any waves as the surf forecast wasn't promising.  However, with our great introduction to Brittany in Quiberon, we had high hopes for this more remote area. 

Even the names of the towns seemed intriguing.  Lot's of 'P's and apostrophes in names like Penmarc'h, Pouldreuzic, Plozevet, and Pluguffan. 

PictureHomes in Pouldreuzic
We drove through craggy rolling hills, crossing rivers, and rounding the larger city of Quimper.  Suddenly the roads narrowed - all routes seemed to be single-laned.  There were fields but they all seemed to be fallow - nothing was planted - and it was the end of May!  We saw very few houses, just lots of open countryside.   Nothing really changed as we neared the coast and approached our hotel.  However, the architecture of the homes was quite different.  As we later learned, the homes were built for multiple families and their animals - to shelter them from the harsh winters.  Then, there it was - a completely incongruous building with neon lights - the Breiz Armor.  Although the hotel was nice in a Best Western sort of way, it seemed completely out of place on Penhors plage which is officially part of Pouldreuzic.  We decided to cancel our dinner reservations and to search the nearby towns for a more 'authentic' place to eat.   

PictureTronoen Chapel with Calvary (on the left)
Continuing on the small country roads, we found some charming villages and ultimately a good restaurant.  On our way back just after sunset, out in the middle of nowhere, we passed what looked like an ancient chapel.   In the dim light, we discovered that outside this chapel was one of the oldest and most famous calvaries -  large granite sculptures which depict the life of Christ - from before birth to crucifixion and the resurrection.  One of the most notable things which I found indicative of the attitude of 15th century Brittany (it was built about 1450), was a sculpture of Mary giving birth - breasts exposed.  I'm surprised this wasn't considered blasphemous but again, I think it bespeaks the practical, down-to-earth nature of the Bretons of the time.  It was getting dark and our pictures didn't turn out well, so the one at left was borrowed from the Wikepedia site. 

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Sunset from Penmarc'h
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Tortured coastline from GR 34
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Finistere Menhirs
In the morning we got up and did a hike along the GR 34.  At over 1600 kilometers, this is one of the longest Grande Randonnees in Europe.  It was a cool drizzly morning and we made our way along the tortured rocky coastline to the north.  To the south there were miles of sand dunes.  Along the trail, there are signs about the area.  Many explain the harsh life of the Finistere Bretons, most of whom made their livings harvesting kelp, then submitting it to an arduous process to extract iodine for sale.  It was a meager living at best.  They also talked of shipwrecks - not from centuries ago, but from the 20th century.  While this group of Bretons knew the ocean, the rocky coast, radical tide changes, and severe weather cost many their lives.

PictureThe town of Morlaix
After a bit more exploration of this bleak part of Finistere, we continued our trip  towards our next destination, Perros Guirec.  Along the way we passed though a spectacular national park of rocky cliffs and pine forests, then decided to stop for lunch in Morlaix, hometown to one of our French friends.   The town is built in a canyon carved out by a small river.  On the north end is a harbor which is inland from the coast.  We'll definitely return to do more exploration of Morlaix.

PicturePerros Gueric sunset
Arriving at our hotel in Perros Guirec, we were blown away.  The  Hotel Manoir du Sphinx is built into the side of a cliff that looks out onto the seven islands.  It sits half way between the two main areas of Perros Guirec - a harbor to the east and a long beach to the west.  We went for a walk to do some exploring and found the people very friendly - even more reminiscent of the Basque region where everyone you pass says hello.    We had an excellent meal in the hotel's restaurant and explored a bit more of the town afterwards.

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Starting our hike along the GR 34
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Pink Granite Formations
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Looking back at Perros Guirec
The next day we did a hike towards the west on the GR 34.  This section of the Grande Randonnee features spectacular pink granite rock formations.  The trail itself follows the ancient Sentier des Douaniers - trail of the customs agents.  Along the trail there are small structures built of pink granite that are camouflaged among the rocks so that the custom agents could spy on smugglers. 

After several miles, we turned back passing through the village of Ploumanac'h, and then catching up to the GR 34 again.  There was some small crowded surf in the afternoon but I decided to pass.  That evening we had another fantastic dinner, this time at La Suite overlooking the beach in western Perros. 

For breakfast the next morning, we stopped at a artisanal bakery where we found some of the best bread we've eaten in France - and that's saying a lot!  We're big bread fans and the French with their 3-4 bakes a day supply some of the best, freshest bread in the world.  But I do love heavy breads like the black breads found in Germany and eastern Europe, so I really enjoyed the hearty fresh bread of Brittany.

In looking back at our quick trip up the west coast of France with our stops in Ile d'Oleron, Olonne-sur-mer, and Quiberon (which is part of Brittany), clearly Brittany wins out.  We felt at home there much as we do in the Basque Region.  Between the history (actually pre-history), the spectacular landscapes, the rugged ocean, the GR 34, and the interesting people, there's much to explore and experience.  Without a doubt, we'll be going back.
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    Steve Jackowski

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