Thursday, May 08, 2003

What is a Small ISV?

On this weblog I often use the term "small ISV".  It's time to define what I mean.

ISV stands for "Independent Software Vendor".  The acronym seems to be most often used within the Microsoft ecosystem, so it carries somewhat of a Windows-centric connotation, but that's not really part of its definition. 

An ISV creates, markets and sells software products.  Consulting shops are not ISVs, although an ISV sometimes does consulting work.  Value-added resellers are not ISVs, although an ISV sometimes resells stuff from somebody else.  In an ISV, you have to envision the product you want to build and take a risk that somebody will still want to buy it by the time you get it built.  If you don't have a software product, you are not an ISV.

A small ISV is an ISV which is not big.  :-) 

When I think of a small ISV, I think of a privately held, self-funded company, but I won't reject you just because you happen to have a VC lurking around. 

The word "small" is a relative term, so I won't define a quantitative limit.  Your small ISV might have 3 employees, 25 employees or 50.  If you have more than 100, you might want to start asking yourself if the word "small" is still appropriate, but I won't kick you out of my club just because your headcount has 3 digits.

Small ISVs tend to stay small.  If they get big, they do it very slowly.  They grow organically, funding their growth with their own revenues.  Small ISVs are often very boring and very profitable.

I like writing about small ISVs because I work in one.  I believe small ISVs are where the opportunities are today.  I know that not everyone is going to agree with me on this point.  :-) 

I'm suggesting it may be time to reset our expectations.  During the bubble, we put a lot of our efforts into building big companies fast.  Our perspective changed radically when we saw things like LNUX with a $13 billion valuation on its first day.  Small private companies could not begin to produce that level of excitement, so we began to treat them with disdain. 

It's 2003 now, and not much of the bubble survived.  LNUX has lost 99.7% off its value.  I could name dozens of other examples with similar results.  In fact, one of the few remaining leftovers from the bubble is that we still have widespread disdain for small companies.  I think this attitude sometimes blinds us to the cool opportunities to be found in building a small ISV.