From Engineer to Entrepreneur: Becoming an Indie Hacker
2013 was arguably the peak year for early-stage startups. Since then, VC investment in early-stage startups has decreased every year since 2013, according to Techcrunch.com. This downward trajectory shows no sign of stopping. While overall investment is still high, it is being concentrated among high-value “unicorn” companies that VCs see as a surer bet.
As support for new startups declines, many potential startup CTOs are becoming “indie hackers,” using their skillset to create lifestyle businesses with a much higher likelihood of success. The drive behind this is simple: money doesn’t yield much happiness without accompanying freedom and purpose.
Entrepreneurs are increasingly aiming to create smaller businesses that still offer the opportunity of a good income (six figures) without totally giving up their time, autonomy, and lifestyle. Better yet, these smaller business have a much higher likelihood of success than a traditional startup. Some entrepreneurs aim to do this solo, using technical automation to run a successful business entirely on their own.
Many of these businesses start as software engineer side-projects. This eliminates even more risk —even if the business is unsuccessful, you’ll still have something interesting to add to your portfolio.
In this post, I’ll outline the steps that any software engineer can take to become an “indie hacker.”
Indie hackers aim to create software or technology businesses that can be launched and grown, at least initially, by one person (the founder). Technical skills are covered, but one of the key habits of successful indie hackers is that they learn the most important aspects of marketing, sales, customer service, accounting, and business management. This allows them to run their business with just one staff member who wears many hats: themselves. Because the business only needs to support one person, the founder can target a micro-niche: a niche so small that many other businesses have overlooked it, creating a small window of opportunity.
To run the business in a way that maximizes quality of life, indie hackers make extensive use of automation. Anything that can be automated should be automated. This is achieved through the use of other software, as well as scripts and CRON jobs, to handle a myriad of tasks.
This all sounds rather dreamy, and while some indie hackers do get their businesses to a point where they can be maintained (and keep growing) with only a few hours a week of time invested, these are in the minority. In most cases, you must be prepared to work hard on your indie hacker business, especially when it hasn’t yet found product/market fit. Even if you can run the business with just a few hours of commitment a week, as with all things, you will likely get better results depending on the amount of time you invest.
Understanding your motivations
Before you start thinking of ideas for a potential business, you need to start with an understanding of your motivations.
- Are you trying to make as much money as possible?
- Are you hoping to make just enough to pay your bills, freeing up more time to parent your children?
- Do you want to become a digital nomad and run your business while traveling the world?
- Are there tasks that you know you are simply not willing to do because you hate them? Cold-calling is a common example.
Your motivations must shape your business. If you want to make a huge amount of money, you’ll need a larger niche. However, you’ll also face more competition. If you want to grow and maintain the business in as little time as possible, you’ll need to create a product that is easy to automate. If you absolutely hate the idea of doing demos with customers over Skype, then you’ll need to select a target market that is easy to reach via free content and social media, and select a lower price-point that you can sell without having to do sales and demos.
One of the most useful exercises you can do is figure out an initial target monthly revenue. Estimate roughly how much you’ll charge for your product, then divide your target monthly revenue by how much you plan to charge. This will give you a rough estimate of how many monthly customers you’ll need in order to reach this milestone.
Selecting a market
I was tempted to title this section ‘Coming up with an idea’, but I think the relentless focus on ideas is harmful to people starting new businesses. The biggest reason why ideas fail is that they’re not closely aligned with a market who will pay for them. I recommend that, instead of thinking of a business idea, you start by selecting a market that you understand, or can commit to understanding.
- What are the markets you understand? Since you’re a software engineer, there’s one. If you freelance, that’s another. If you work in a particular industry, you likely understand that industry better than most: that’s another potential market. Also look to your other hobbies and memberships. If you’re a cyclist, you understand the cyclist market, for example. In addition, think about the people you have access to, and the markets they represent. If a close friend flips houses for extra income, that’s another potential market you could research via your friend. Your colleagues, whether they are recruiters, graphic designers, or scientists, each represent additional markets you can grow to understand deeply through your access to people in those markets.
- What are the markets you DON’T understand? Stay away from these. These are markets to which you have no personal connection. You may stumble across problems faced by these markets that could be solved with software, but unless you’re prepared to force an understanding of these markets — usually by cold-calling people in the industry, which is as painful as it sounds — you won’t know how to speak the language of, appeal to, or sell to, the people in this market.
- Think smaller. At least initially, your business only needs to support one person. This means you can target small niches that most startups and existing potential competitors would dismiss out of hand. These small gaps represent opportunities. Take your initial list of the markets you understand and try to go smaller. If your spouse is an office manager at a tech company, you have the potential to understand not just the ‘office manager’ market, but the ‘office manager at a tech company’ market.
- Isolate the hardest problems. What sucks about being part of the markets you’ve selected? If these markets are appropriate, you’ll have an understanding, or easily be able to gain an understanding, of the hardest problems in these markets. Software the alleviates these hard problems has a good chance of being successful.
- If you’re not comfortable doing sales, go B2C. Creating software for businesses is easier than targeting consumers, but only if you’re comfortable doing sales activities like pitching and cold-calling. If that sounds like a waking nightmare then you’d be better off focusing on a B2C market (selling to consumers). For example, you may build a free community and charge some members for a premium membership. The free value you provide markets the product for you and functions as a replacement sales pitch.
- Look for opportunities to sell access on a subscription model. SaaS (“Software as a Service”) is an excellent pricing model for a solo entrepreneur because it offers something similar to a predictable, monthly salary. With a SaaS model, customers generally pay to access your software every month. Your monthly earnings are a simple multiplier of your current paying customers times their monthly fee. If you perform well as a founder, you can get a raise every month if your customer base grows consistently. Conversely, if you perform poorly or neglect the business, you may receive a monthly pay-cut!
Testing your market
Once you’ve selected a market you want to serve, and a problem you want to solve, your next goal is not to build a product to sell. Instead, it’s to validate the demand for your idea as quickly and cheaply as possible. The question is: how quickly can you build something that delivers the essence of the product you want to offer?
While some people advocate building a landing page and fake payment page before your product exists, I’ve found that this generally doesn’t work very well and feels a little icky. I think it’s much better to build a stripped down version of your product, the minimum required to provide value worth the price-tag, and then sell that. What you’re looking for at this stage is engagement — whether negative or positive — signs that people are interested in what your product aims to do. If you email a bunch of prospective customers and receive scathing explanations of why your product doesn’t solve their problem, this is still more positive than silence. A negative response indicates that the person, at least, cares about the problem you’re trying to solve. Silence indicates that they don’t care, and they don’t relate. Most products fail because they illicit no response from the market, rather than an initial negative response.
Here are some of the methods you can use to try to get your first customers:
- Sell to your network
- Pay-per-click ads (e.g. Facebook ads, Google AdWords)
- Forum posts
- Content marketing
- Social media
- Emailing press outlets
- Product Hunt, Hacker News, etc.
Overcoming engineering habits
When software engineers are interviewed about starting software businesses, the number one mistake they say they made was spending too much time hacking and neglecting marketing. It’s understandable: most of us are good at hacking and really not good at marketing. Would you rather hack away on a new machine learning-related feature, or send out 50 cold-emails? I know what I’d rather do… but often, success as an indie hacker means always doing what’s best for the business. Finding the right balance between engineering and marketing is one of the most challenging aspects of becoming an indie hacker.
Mike Carson sent ripples through the entrepreneurial community when he revealed that his solo business, park.io, makes $1.5 million in revenue per year. He achieves this by automating everything, using a complex array of scripts to perform as many business-related tasks as possible. These scripts complete tasks that many other business would rely on paid staff to perform, allowing Carson to keep overhead extremely low.
“Another thing that is a huge advantage to programmers is our ability to automate processes. Any time I find myself doing something over and over, I try to write a piece of code that will automate it. I have so many automated processes running now that I feel like I have a team of 50 employees working around the clock, constantly and accurately, always in the background. park.io is set to break over $1M in revenue this year and I am the only employee, but only because I am able to leverage all of the automated processes that are able to do the work for me.”
-Mike Carson, park.io
As software engineers, our ability to automate tasks is a superpower that many people don’t have. Automating menial tasks will free you up to spend your time and energy on things that make a difference in your business.
This post is meant as a brief introduction to the possibility of going from engineer to entrepreneur. There are so many topics involved, from marketing, to SEO, to pricing structures, to reducing churn, that I cannot cover them all here without writing something resembling a book. Luckily, there are some wonderful resources available to help you get started on your journey to becoming an indie hacker.
- Stripe Atlas publishes excellent guides on running an internet business, many of which are written by Patrick McKenzie, a former indie hacker who has dedicated millions of words to sharing what he knows about combining engineering and entrepreneurship. Check out this guide in particular: finding your first customers. If you like Patrick’s writing, you can find more on his blog.
- Indie Hackers is the community that coined the phrase “indie hacker” used in this post. It’s a collection of interviews with indie hackers, a community, a podcast, and a collection of helpful articles, all around the topic of helping engineers start businesses. The interviews in particular are highly recommended.
- Tyler Tringas’ Micro-SaaS eBook, though unfinished, contains some great content on the process of creating a small SaaS product. Tringas recently sold StoreMapper, a SaaS business that made $21k per month.
Share your business
If reading this post inspires you to start a business, or if you’ve already started an indie hacker business, we’d love to hear about it. Feel free to share a link in the comments!