Here is a short presentation I gave to a group of startup founders about two weeks ago.

Link to PDF: https://docs.google.com/file/d/0B14i92YeDqMoWmZkemFmZXZlSHM/...

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Think small:
The micro startup.
By orangethirty@gmail.com

What is a micro startup?

A micro startup is simply a business that is niche-oriented, and mostly driven to sell one product. The focus is to develop a business that does not need much maintenance.

A good example of this is bingo card creator by patio11. The business only features one product, is about a very specific niche, and does not need much maintenance.

What are the downsides of a micro startup?

It does not have the same economic potential as a bigger business. It is not as attractive as building a business that sells millions and millions of dollars.

What are the upsides?

Due to its lower economic potential, and low maintainability, a micro startup can simply be left running in autopilot as a source of passive income. It rarely requires any cost of bringing in a development team to keep it running. Your costs are basically flat and stay the same for long periods at a time.

Another benefit is that the investment requirement is very low. You can run many micro startups off of a simple Wordpress or Joomla install. There is no need for a costly server because an economical web hosting account will almost always do
Taxes and legal structure is also better. You can incorporate your micro startup under an umbrella corporation. Thus, any financial loss from a failed micro will benefit you in more ways than being a simple LLC.[1]

There is also no need to bring in Venture Capitalists (Vcs). You will not have to dilute your stake in the business, or have to respond to the sometimes incoherent demands of a VC. There is no time wasted raising investment.

You also get to spend more time doing other things not related to the startup. It will simply not consume your life.

The smaller you think, the better off you will be.

People in Silicon Valley are always talking about changing the world, being innovative, and disrupting markets. That is why they try and build these huge businesses that (mostly) end up lacking a proper profit channel.

With a micro startup you do the inverse. You pick a current market niche, improve on the current offerings, and simply ride along until your sales die. Rinse and repeat. Although this does not sound very interesting, a lot of innovation happens at this level. The constant tweaking at the micro level allows for new products to evolve over time.

Landcade as a live example.

The aim of landcade[2] is to sell optimized online marketing tools. Things like landing pages, and email campaign templates are adjusted to a level where they provide a good starting point for businesses to develop from. Instead of relying in a lot of A/B testing to get the basics down, landcade simply gives you a great starting point that has already been A/B tested. All you have to do is to fine tune them.

Landcade is not disruptive, but it improves on the current offerings. Places like Theme Forrest don't have this sort of product readily available. The business is also not engineered to grow into a multimillion company. It is designed to generate a thousand dollars in profits. Not per month, but during its lifetime.

Could it make more money than that? I don't care what it could do. All I focus is in getting my investment back (of $200) and profiting.

Is building micro startups worth it?

Yes. The reason is that micro startups usually fare better than bigger ones in terms of return on investment (ROI). I run, and have run several of them. Each micro startup has managed to at least double the initial investment amount (including cost of time spent developing the product at a rate of $50/hour).

This is a very smart investment strategy, because it requires small investments that mimic the functionality of compounding interest. You invest $200 on one, profit $800. Then you invest another $200 on another, and profit $600. You made not have made a lot of money in terms of actual amounts, but the ROI is very high. As you gather experience, you are then able to build business that produce thousands of dollars worth of profits from a very low investment. My best personal example (which will remain unnamed) is (producing) set to generate up to $60K on one year. All with an investment of around $1700. Not millions of dollars, but enough profits to allow for a significant improvement in quality of life.

How do you know which micro startup to build?

Another great benefit from micro startups is that you don't waste much time creating a product. Nothing is created from scratch, but improved upon. Landcade improves on online marketing tools. It does not create a whole new type of product itself.

Let's use one of the many ideas I have in store. One of the many problems people have these days is storing personal files. Things like images, videos, and documents. All of the big offerings out there are doing a fairly standard job of serving a very wide audience. But they really miss the mark in serving smaller ones. My idea involves creating a generic file cloud that can be re-packaged/re-purposed for specific niches. Imagine if you were a wedding photographer. Your live hood is the files that your camera outputs. Meaning that you need to store those files in a special place. I would develop a web app that would allow photographers like you to upload your files (following your requirements), and give you other additional functionality that other services don't provide. All of it aimed at catering to your needs. I know what you are thinking. This product could turn into another one where photographers could simply upload and buy the printed images from the service. (which would be another micro startup running in parallel).

The smaller the idea, the more focused it is, the bigger the potential to profit.

How do you market a micro startup?

This is the easiest part. You don't really need to spend that much time (or money) marketing it. The focus is spent on creating key relations within the target niche market, and providing (for a limited time) small loss-lead promotions to drive in traffic. Say a “get a free 30-day trial of the file cloud” specially targeted to photographers.

The really awesome thing about this is that the smaller the niche, the easier it is to find your customers. Wedding photographers are simply a web search away. One simple email campaign can have your micro startup profiting from week one. There are also little to none costs from marketing campaigns, due to how you can do direct 1-on-1 marketing with your niche market.

[1]Talk to your lawyer and accountant.
[2]http://landcade.com. Optimized online marketing tools. Has not yet launched.