Side projects do not need to be venture backable.
I have been thinking a lot lately about working on side projects. Side projects provide a number of opportunities for growth: you can learn new skills while building a side project, and you can provide value to other people at scale.
One thing that I have noticed is that many people go into a side project with a grandiose vision of what the project could become. Quickly, it starts to feel like the side project -- which was once a small idea -- needs to be venture-scale to be successful.
There is a difference between a side project and a startup.
Startups need to grow. Startups are businesses that use technology -- whether it’s software, hardware, biotech, or something else -- to create products that people want. Startups raise capital to fuel their growth, and hope to eventually go through an exit like an IPO or an acquisition.
If you are not growing as a startup -- or building product -- then something is going wrong. You need to be constantly iterating on your ideas and getting to know your target market.
This heuristic does not apply to side projects. If you are building a side project, you can go as slow or as quickly as you want. There is no need to figure out how your side project becomes a venture-backable business, because the scale is different.
Startups need to scale because the mechanism by which startups are funded, venture capital, is contingent upon growth. If startups did not grow to the scale of Facebook or Airbnb, venture capitalists would have a hard time justifying the risk they take on.
Interestingly, this premise extends to many technology companies as well. In the Valley, there is a sense that what you build needs to be venture backable. Otherwise, how are you going to get the capital you need to fuel your development?
I am particularly excited by methods of capital such as “bootstrap venture capitalists” which invest in companies on terms that do not require venture scale. These investors often take a portion of earnings, rather than substantial equity in a company, and earn a return based on the expected future cash flows of a business. But, I digress.
If you are building a project, don’t think about how it can become venture backable. Think instead about how you can build something that people want.
There are many great projects and companies out there that provide value to people -- and can do so at scale -- without needing venture capital. One example that comes to mind is Panic. Panic is a software development company that has done many great things, and yet has not resorted to venture capital.
Then there’s projects like Leave Me Alone, which are made by independent makers and have no clear path to achieving “venture scale.” With that said, Leave Me Alone can still monetize and make money -- the goal is to build a sustainable project, not a Unicorn.
When you are building a project, you need to consider what scale that project should realistically have. Throwing out an idea because it is not “venture backable” makes no sense if you are passionate about the idea. There’s likely a way you can make an idea venture backable further down the line if you really want to, but in many cases you don’t even need venture capital dollars to make something that people want.
Raising capital is not a requirement to build something cool. Use your skills to hack something together, and see if other people like what you have created.