The purpose of a business is to make money.  Business make money by bringing in more than they spend.  Doing that requires a plan.

When I filed the paperwork to organize Nesota, I didn’t have much of a plan.  Nay — I had no plan at all.  I had a whiteboard, an LLC, and a web server.  No plan.

There is some precedent for starting a company before knowing the company’s area of business.  For example, the founders of Hewlett-Packard started their now-enormous company without a clear idea of what to do.  Eventually, they figured it out, and HP went on to help establish what became “Silicon Valley” as we know it.

Hewlett and Packard might not have known the exact nature of their future business, but they knew enough to develop a list of guidelines.  That seemed like a good idea, so I did the same:

• Find a problem first, then build the technology around the problem, not vice-versa.  An all-too-common mistake among tech companies run by engineers is to focus on the technology instead of the customer needs.  In effect, they build an amazing solution to a problem nobody has.  They expect the world to beat a path to their door just because they have the coolest technological marvel.  Sorry, doesn’t work that way.  The correct approach is to develop a hypothesis about a problem, validate your assumptions by bringing your ideas in front of actual potential customers, and iterating until you hit on something viable.
• Identify an opportunity with low market risk but high technical risk.  Think about it:  not often have companies failed solely because the engineers shrugged and said, “Well, I guess what we set out to do is impossible,”  med-tech and bio-tech companies excepted.  In general, if the market exists, engineering can figure out a way to deliver something that will solve the customers’ problems.
• Ship early and ship often.  Focus on getting early cashflow and customers to support continued work and obtain real feedback.  Manage scope to keep the engineering difficulty and schedule in check.
• Build a sustainable business.  Something with a real business model (i.e., not reliant on web advertising, and definitely not “free”).  Something that will still be relevant  and valuable in a couple of years.  Not necessarily “sustainable” in the green sense of the word.
• Have enough profit potential to be a lifestyle business.   I wanted something that would give me financial freedom.  If I could do it without hiring anybody, so much the better. Net income targets would be in the $100k — $500k per year range.  Not huge, but enough to allow me to live comfortably.
• Not requiring external investment.  Revenue goals like those mentioned above are far too low to be interesting to venture capitalists.  Accepting outside investment makes one beholden to outside interests, which are not always well-aligned withe the founders.   No, I wanted to bootstrap the entire operation.
• Selling products as opposed to services.  Consulting and contract work can be lucrative, but the money is flowing only while you’re working, and such business don’t scale well.  A business selling products can “work” even while I’m hiking in the woods.
• Doing something I love.  Work takes a lot of time.  Why spend so much of the best years of my life doing something I don’t enjoy?  There’s always a risk in choosing an enjoyable topic that the existence of the company will destroy the enjoyment, but that can be mitigated by selecting a related field instead of the primary area of enjoyment.

Many of these criteria were informed by my experiences at Stanford, especially the course MS&E 273: Technology Venture Formation, which was perhaps the most useful, the most enjoyable, and the most work of any I took there.

Criteria: done.  Next step: identify The Problem.