Reference no: EM132224885

By ADRIANA GARDELLAFEB. 16, 2011 Last April, Jared Cosulich and Adam Abrons founded Irrational Design, a technology company, in San Francisco. Since its debut, the start-up has introduced three online commercial products. The founders, who met while working at a software engineering company, Pivotal Labs, are determined to build a business that is free to take risks. THE CHALLENGE To start a technology company without seeking or taking venture capital financing. THE BACKGROUND Mr. Cosulich and Mr. Abrons both have software engineering backgrounds and experience working on venture-backed start-ups. Previously Mr. Cosulich, 30, founded CommunityWalk, a Web site that allows users to create interactive maps. Mr. Abrons, 39, is the former chief technology officer of an information technology consulting firm, ThoughtWorks. The two founded Irrational Design with the shared goal of building an agile, bootstrapped company that would be free to experiment. Mr. Cosulich said it was harder for an entrepreneur to “try crazy things” when investors were involved. “They prefer that you double down on what’s working,” said Mr. Abrons. THE OPTIONS From the beginning, the founders were determined to try bootstrapping. Mr. Cosulich said he might have been tempted to take venture capital had the “right” investors come along — “but more and more I’m not sure the ‘right’ investors exist.” Although he had a good relationship with his CommunityWalk investors, he said he came to believe that founders and investors were rarely motivated by common goals. Mr. Abrons reached a similar conclusion after his experience with ThoughtWorks. He said the company’s investors had unrealistic expectations that led to litigation after the technology bubble burst in 2000. “It was a lose-lose situation,” he said. For Mr. Abrons, who noted that Irrational Design had low overhead costs, the question became, “Why take money from investors?” THE DECISION Irrational Design has stuck with its plan to bootstrap, releasing a series of experimental products with the hope that at least one will catch on and begin generating the revenue needed to build the company. “Without V.C. funding, we’ve been forced to launch products before they’re ready as we can’t afford to push a product too far without getting customer validation,” said Mr. Cosulich, who acknowledged that rough edges abound on Irrational Design’s offerings, none of which are producing revenue yet. (Mr. Cosulich and Mr. Abrons pay the bills with software engineering consulting work.) And marketing is limited. The total monthly advertising budget of about $500 goes exclusively to the search engine StumbleUpon. The Matching Game, the company’s first product, had its debut last April. It’s a dating Web site that also allows users to play matchmaker by commenting on the likely compatibility of people based on their submitted photos. The co-founders say almost 100,000 people have played the site’s game, and 3,191 have posted photos and profiles that enable them to be matched with other users. Once the site builds a community, Irrational Design expects to generate revenue through advertising. But it’s not there yet. Until June, there was no way for users to meet one another through the site, a situation that resulted in confused e-mails from would-be daters asking how they could contact their matches. The founders replied that they couldn’t. “But we went out of our way to help by manually connecting them,” said Mr. Cosulich. In November, Irrational Design introduced Insightster, an application that functions as an online suggestion box that businesses can use to share, organize, rate and promote ideas internally without having to call meetings. It is distributed free of charge through the Google Apps Marketplace, which lets users rate and review applications. Recently, a total of five Insightster reviews, all of them positive, were listed. While Insightster’s competition includes Kindling and Intuit Brainstorm, Mr. Cosulich said his product was distinguished by its simplicity. Irrational Design is not currently charging Insightster’s users, but that is the ultimate goal. While Insightster’s future pricing model has not been determined, the company will probably charge for storing attachments and for security. There will continue to be a free model as well. Mr. Cosulich said 560 companies were using the site, which he described as "incomplete, but effective," and that a handful more signed up daily. Secret Goals, the third product, was introduced in December. Mr. Cosulich said that this message board, which allows users to share and work toward their goals anonymously, recently had 176 users. The concept, he said, grew from the Alcoholics Anonymous model. “Sharing your thoughts and feelings as you work to achieve your goals without fear of judgment is something that A.A. has successfully supported for a long time,” he said. Though it is too early to tell whether users are achieving their objectives, Irrational Design is betting that they will benefit from a tool that allows them to reflect on their goals without worrying about what others think. While similar ideas exist, Mr. Cosulich said Secret Goals, which requires no user profiles or other identifying information, lets users operate more anonymously. The founders are scrambling to capitalize on demonstrated interest by building out the site, which they admit is limited. For example, Secret Goals arrived with just one feature. Users could only post their current feelings about their goals. Soon after, they were able to send anonymous messages of support or congratulations to other users. Secret Goals expects to generate revenue through advertising, which might focus on goals like losing weight or learning to play the guitar. The partners have ideas for 20 to 30 more products, but have concluded that they must focus on their current offerings until they succeed — or fail. They recognize that if multiple products show promise simultaneously, they will not have the resources to pursue all equally. “We are creating helter-skelter experiences and being pulled in 10 different directions,” said Mr. Cosulich. He acknowledged that Irrational Designs’ products might benefit from investor scrutiny, but he is also convinced that he and his partner bring something more valuable: a fresh, experimental perspective that could help Irrational Design become a trusted brand. “When you have V.C. money, you have to impress people who are not necessarily your customers,” he said. Ultimately, the founders hope that exceptional results will make Irrational Design even more profitable than a venture-backed start-up. “It’s not that I don’t want to make money,” said Mr. Cosulich, “but I have a longer time frame for building a company.” -----------------------------------

Using the following article, answer the three questions:

1. Do you agree with their decision to bootstrap? What are the alternatives?

2. Discuss the advantages and disadvantages of working on 3 products simultaneously.

3. What risks are they taking by bootstrapping?