Is this how you want to sell your company?

May 8th, 2010  |  Tags: , ,  |  Leave a comment

Apparently the company that runs the Stack Overflow web site recently secured some funding, and the founders have been characteristically glib about the possibilities enabled by their extra capital.

There’s a good post at the 37signals blog that details why it’s probably a bad idea for Stack Overflow to take VC (or, at least, why their stated reasons for taking VC don’t make sense), but it seems that the founders must already know that this is the case. In their blog post announcing the funding, the Stack Overflow gang describe it as follows:

So we created Stack Exchange to bring the technology behind Stack Overflow to a much wider variety of sites. We tried charging for Stack Exchange, and that didn’t work so well. So we asked ourselves, “How would the people of 1999 solve this problem?”

And the best answer we could come up with was, let’s make the damn thing free, and get some VC somewhere to pay for it.

Indeed, this business model sort of made sense to me in 1999. Except then, “make the damn thing free” was called “release your core product as open source and run a consulting business,” and “Stack Exchange” was called “The ArsDigita Community System.” Of course, there are important differences: for example, ArsDigita was profitable. But for a lot of the 1999-vintage businesses that took funding without a plan for profitability, “get some VC somewhere to pay for it” didn’t end so well for anyone involved: founders, investors, or engineers.

(I’m not suggesting that Atwood and Spolsky’s actual business model is “coast on external funding until we can magically discern some way to become profitable.” But if you’re making flippant comparisons to the business climate of 1999, then serious comparisons to the business climate of 1999 should at least have occurred to you.)