Joel Spolsky at Startup School 2012

Spolsky and Michael Pryor started Fog Creek in 2000 because they could not find a workplace they wanted as programmers. They planned to fund the company with consulting work, but the dot-com crash quickly dried up that market. Selling their bug-tracking product, FogBugz, gave them a slower, steadier source of revenue.

Spolsky describes Stack Exchange as a get-big-fast business and Fog Creek as an organic-growth business. He says network effects and a race to claim new territory can make speed important, while a product that serves one customer well can grow gradually in an established market. Fog Creek took about 10 years to build FogBugz into a respectable business.

Stack Overflow ran on a small team and limited spending for its first two years. Once Spolsky concluded that Stack Exchange needed to claim territory in network-driven Q&A, he raised from Union Square Ventures in about two weeks. He credits Fog Creek’s track record and Stack Overflow’s momentum with making fundraising easier and improving the terms.

FogBugz made recurring revenue that Fog Creek shared with employees through profit bonuses. The company used some of that cash flow to support Trello, which had reached about 800,000 users after a year but had not settled on a way to make money. Spolsky said the team could seek investment later, with traction and a proven product.

Spolsky warns against straddling slow, careful growth and a fast land grab. He points to Juno’s competition with AOL: both had network effects, but Juno hesitated to spend on growth while AOL distributed signup discs widely. He argues founders can build a reliable business through bootstrapping, or pursue a land grab with the speed and spending it requires.