We released our first iPhone app early in December.  It’s called Bike Maps and it lets you look up Google bicycle directions with a fast, native interface.  We struggled to find any sales information for iOS apps before we got started.  Inspired by Patrick McKenzie’s open business data we decided to share our numbers too.

Our app was approved for sale on December 8, 2011 after three days in review.  This version of the app had a crashing bug that did not appear when running in debug mode (dereferencing a null pointer, for the nerds out there).  Heartbroken, we had to pull the app.  We submitted a new, fixed version shortly thereafter and we were finally live on the store by Dec 11th.  We now always test a version compiled for Ad Hoc distribution before submitting to the App Store.

We submitted our first feature update on December 15th and after another three days in review it was released on the 18th.  It included Address Book integration and several smaller UX enhancements.

We sell the app for $1.99.  Apple keeps $0.59 and we keep $1.40.  We have not yet experimented with pricing changes, but will soon.  We’ve sold on average 3 copies a day to date.  Zero-sale days are very rare, which is a relief.  When you have no sales, it’s hard to gauge how far away you are from reaching that first one.  When you have three, it’s obvious how far away you are from six.

We’re listed in the navigation category which has thousands of apps.   It’s one of 145 for “bike maps,” but most of those are just apps that only work in one city or region.  Our app works anywhere in the US.  On days that we’ve sold 6+ copies, we’ve made brief appearances on the “Top Paid” list for the category.  Anywhere between 175-195.

To-date we have earned $102.  That covers one Apple developer license.  Not bad for a hobby, but far from a business.  That’s about it for expenses.  The website runs on a cheap shared host that runs several other sites.  Email is provided for free by Google Apps.  We have not paid for any marketing, though we did play with $100 of Ad Words credit, to little effect. The average CPC for us was $1.34. With experimentation we had good click through rates for less than $1 but that was still too pricey to warrant continuing past our $100 credit.

iTunes did not calculate an average rating for us until we had 5 reviews.  It showed up in search results as having “no ratings” even when we had 1-4.  We didn’t get to 5 until the end of the month, but we’re hoping that makes a material bump in our sales.

We’re using Google Analytics and Distimo to augment iTunes Connect (which is really pretty terrible).  We set up a Goal in Analytics to let us see how many folks click on the “Available on the App Store” button.  We can get a rough idea of the correlation between views, conversions and sales, but what happens once a person transitions to the App Store is totally opaque.  The lack of information about our customers from Apple is a continuing source of frustration.  We have no idea how many sales come from people browsing the App Store directly, vs coming in through our web site.

It has been ridiculously rewarding to use our own app.  The lack of bike directions on iPhone is such a major oversight for cyclists, so it’s nice to have a simple app that fills that gap.

We’ll update you on how it goes next month.

xoxox

J & J

I remember the thrill when I signed that first set of stock option grants. I was looking around the room thinking, “these are the people I’m going to do something really cool with.” Promise is in the air. We’re all in this together. We’re going to build something. Something difficult, against the odds. Something with substance. I was excited and ready for the hard work, which I got. Here’s a scenario: Fast forward, the company’s out of time and money. The fire sale’s on. People are jumping ship. And those options? Well, they’re way under water. 

Has it happened to you? It’s happened to me. More than once.

When stock options no longer live up to their name: “Incentive Stock Option Grants”, and motivation is waning, it starts to feel like working at a startup is like rolling the dice. Signing those ISO docs starts to feel like a sham transaction. And here’s the problem: When we go into it assuming the stock options won’t be worth anything, it changes the culture. There’s no “promise is in the air.”  It’s a joke. The mystique is gone.

Maybe it’s time to go work for EnormoCo writing java. 

Or, maybe it’s time to fix something that’s broken in this startup culture. 

It’s called negotiation. Chances are, negotiating isn’t your favorite activity. But the negotiations happen whether you like it or not. And we’ve all heard by now that the folks who engage in the negotiation process inevitably wind up in a better position. This is true for the salary and benefits negotiation when you start a job, but it’s also true when your job’s coming to an end. 

If you make it to a liquidity event you’re in a negotiation. It’s up to you whether you engage in it or not…or even if you recognize it as a negotiation. If you’re lucky enough to have been part of a meteoric success, congratulations, but I’m not really talking to you. 

So what happens when a startup produces something of value, but runs out of cash? It’s time for a fire sale. Chances are, the company is sold far a price that protects the founders and investors, but leaves your lowly options underwater. Next, you’re informed that your stock options aren’t valuable because of dilution or company valuation. Here’s where you grab the horns in this negotiation. Remember, those stock option grants were a signal of intent when you started the job. And remember your contributions. Be articulate about the business value you built for the company. And you did create value because the business has just been sold, right? 

I know it’s not fun, but the negotiation is pretty simple. It consists of you reminding the founders of your contributions and their intent to compensate you for those contributions. You can even suggest that the options weren’t properly valued when issued. 

Yes, you can say this. And yes, they can change the valuation of your grants to honor the intent behind those stock option grants. Hopefully, your founders will agree and work the process so that you do get some reward for your risk. But the really important thing is that you just got better at negotiating. You took a stand.

If you’re like me, you’re risk averse. I’m not talking about risks like sky diving or big wave surfing. 

No, nothing gets my amygdala firing more than the idea of debt. I hate mortgages. Student loans make me ill, and the very thought of taking lots of money in angel investments or venture capital makes me want to hurl.

Now, I know that taking this kind of investment isn’t debt per se. But it’s not free either. There is so much to think about: Taking on equity partners too soon, or too late. Taking too much cash, or not enough. And on the other hand, there are also very real risks to not accepting equity partners when you need the additional support. 

That said, I’m not writing about what freaks me out. I’m writing about what I like about bootstrapping.

Bootstrapping forces you to ship early:

So, you’ve got an idea (a solution to someone’s problem) and you can describe it in thirty seconds or so. But does it hold together at the ten second mark? If so, ship that. Why? Well, don’t forget: Most startup failures aren’t because the product wasn’t developed. Most startups fail because the market wasn’t developed. You can work for months and months, but until you can let your real customers guide you, you’re still just guessing. (And don’t get me wrong, it’s mostly just guessing at this point.)

Here’s how it worked for us: Over beers and market research we cycled through ideas we are convinced have a market, but that we have no real passion for. We thought of simple, silly things just to get us started. Finally, we came up with an idea we thought we would enjoy working on and that there is a real need for. It was a local, mobile, social app with all the requisite game mechanics. We estimated the development time at many months. So we set about cutting out most of what we would have thought, originally, was essential to the product to what we believe is the simplest possible thing that someone would pay $.99 for. This will be our first release. And while it may sound deflating, this whittling project has actually been very clarifying and we’re as excited to use our first iteration as we will be when it’s full-featured.

It forces you to charge for your product sooner:

The competition is stiff. And often, the competition is free. But bootstrapping means that you don’t have the luxury to figure out the business model later. Or to assume that you’ll rely on ads once you get a bunch of traction (which takes time). It means that you need (I mean really need) to validate your idea by finding the people who will actually buy it. And don’t forget, the second best answer to the question of whether there’s a suitable market for your product is, “no”. Bottom line, bootstrapping will force you to face the facts. Quit if it’s not gonna work, take investment if it’s required.

Deciding on the correct price can be an endless exercise in break-even analyses, competitive research, and customer polling. What worked for us was really just recognizing that, at this stage, it is an experiment and we can change it. This is especially easy in the beginning when there is little traction or customer expectation to balance with the business needs.

Bootstrapping requires a limited runway: 

We can only go without pay for so long. But it’s more than just that. For us, building a short runway into our project is a sort of self-imposed time compression that lends itself to decisive thinking. 

Decisive thinking is easiest to achieve when the scope is narrowed. At this point, the questions are simple. Will anyone even buy our product? Can we attract a new customer for less that it costs to support them? Only then can we ask if there’s enough evidence to indicate that the market is big enough to support the business.

Bootstrapping requires that you learn new things.

For me, this is mostly fun. That is, until we get to the part where it’s really just “sales” that we’re talking about. We’re not sustainable until we make some money, and we’re not making any money without hustling for sales. Bootstrapping will force us to learn and stretch our concept of who we are and what our core strengths are. 

All these things make you learn more, faster.

We may even learn what our real business is.