For a guy earning $20.000 a year, it may be a waste of money, but for someone at Kawasakis income level, it is a more than acceptable risk. He does not need to do much, and he has created a very popular site, established his name, and generated a ton of buzz.
This is a marketing guy, and he pulled off a brilliant marketing coup. Don't confuse that with starting a mom and pops store.
You guys are soooo thinking within the box. Think laterally, even in business.
My problem isn't really with the amount of money he spent or the idea, it's mainly with his conclusions.
"For not a whole lot of money and time you can get something out there and see if it works."
This has been true for some time, and anyone with any technical inclination whatsoever has already figured that out. However, it doesn't mean his other conclusion is true:
"One thing is for sure: no entrepreneur can tell me that he needs $1 million, four programmers, and six months to launch this kind of company."
The reason it was that cheap and took that little manpower to build was because the idea was so simple and fairly derivative. It's basically Digg for rumors. Hey, it might work and a lot of people might use it, but you won't find many ideas that can be built off of a Wordpress installation, even though Pligg would've been a better choice as the linked article states. If your idea amounts to a list of things that people vote on, then yes, it will take very little time to build. There just aren't that many groundbreaking concepts that fit into that mold. I guess it depends what he means by "this kind of company", although there aren't many definitions that would render his conclusion valid. The vast majority of ideas will take a couple of months and a few programmers to put together, although he's right about the $1 million.
Every single idea is derivative. Many successful products are simply about taking something that exists and then changing its focus or its look.
That's what he did, and he did it for bloody cheap. If you read the breakdown of his costs, you will see that the actual programming + site + logo just cost $4500.
Having dealt with code monkeys that need to be micromanaged, I'd much rather pay $4500 and see a finished product than waste my time micromanaging the development of such an application.
Is the idea stupid? No. It's a reasonable idea. It's a niche idea that has some potential if executed right. Did he overpay? No.
The hardest lesson I ever learnt was that it's often times really not worth it to do things yourself. As a hacker, it's tempting to always do things yourself, but realise at every single point in your life that it's time that is your most valuable commodity.
He's not a hacker. If he tried customizing pligg, it would cost him a lot more time than if he just hired people for $4500.
Like I said, I don't have a problem with the idea, but the more derivative your idea is, the more likely it is that off the shelf solutions can be easily tweaked to build your product. Truemors is more derivative than most, so using it as a barometer for how much it takes to launch a startup isn't completely accurate.
I don't think he did this as a serious startup. I think he did it to find out what the base cost of a web startup is. $12k is pretty cheap for a VC to learn that.
The only catch is, he may have learned less than he realizes. What he's learned is what it takes to make a prototype. Most of the work comes after that.
It's strange to meter the base cost spending $1k for domain name registration... and more than $4k in legal stuff. The base cost is mostly zero in the real world as the founders should be able to write code instead to buy it, create a basic logo with inkscape (http://www.inkscape.org) in few minutes and get a cheap hosting somewhere.
A VC with a working mind can learn this without spending $12k ;)
Pligg does voice to text and also allows SMS submissions?! Well, Truemors can do both of those things! Some people should really pay close attention to features of a site instead of jumping to silly conclusions.
Anyway, Truemors is NOT a waste. Guy has learned a lot from it and he will use the lessons he learned when he decides what and HOW to fund the next idea that some entrepreneur brings to Garage. He has recalibrated his brain's estimation tables and will use that knowledge to his advantage. That knowledge is priceless and I'm grateful that guy has shared it with us. You should be grateful too and please just ignore the jaded/arrogant/incompetent/jealous detractors that are trashing Guy in his blog.
To say that he has wasted a lot of money just shows how clueless and shortsighted some people are. I hope the author of this piece is not looking for funding or a job...
Technically what Guy Kawasaki has is a "web startup"... But it's more like "web page". Yes, the costs for making a web page are pretty small. It's just a bulletin board system with voting.
Let's not kid ourselves, if you're a programmer you can make a site like that in a few weeks in your spare time. Once you incorporate you are a ... web startup.
Guy's "Rich Dad, Poor Dad" books literally changed my life, overnight. He showed how even the poorest school teacher like myself could get rich with a little financial know how. With Truemors he's just taking his philosophy to the next level. I know I'll be along for the ride with him.
you're thinking of robert kiyosaki (also from hawaii, however :P)
(fwiw, i thought rich dad poor dad was fairly interesting -- i'm not going to hate on it as much as others might -- although it's alleged that some of both some of his anecdotes and financial success were exaggerated or false. see http://en.wikipedia.org/wiki/Robert_Kiyosaki ; google will turn up other criticisms.)
This is a marketing guy, and he pulled off a brilliant marketing coup. Don't confuse that with starting a mom and pops store.
You guys are soooo thinking within the box. Think laterally, even in business.