By Luke Carrière
Lead Organizer of 3DStartup NYC

In August 1994, Nick Longo founded a coffee house in Corpus Christi, Texas, which became one of the first internet cafes in the world. He created a website for his coffee shop and began designing websites for others in his community. By 1996 it had became so popular that he designed software to help people make their own websites and called it CoffeeCup Software, Inc., a startup that went on to win Shareware Industry Awards Foundation (“SIAF Awards”) for Best Web and Internet Software for six years from 1999-2004. In 2000, Nick founded then spun-off Bluedomino Web Hosting, which hosted over 15,000 websites. Nick is now at Rackspace in San Antonio, Texas as “Chief Rainmaker & Director of Strategic Initiatives.” One of the initiatives he is involved in is a collaborative workspace for entrepreneurs called Geekdom.

How did you recognize the opportunity/research the feasibility of the idea?
That’s a good starting place. That was from being a user first. I think a lot of good ideas come from saying to yourself, “hmm this isn’t done right,” or, “I could do this better.”
So, opportunities seem to be right in our own backyard. We are really good at our hobbies and things we do everyday. For example, I’m a webmaster and I don’t like the tools that are available. The idea comes about to make my own software so life will be easier for me. If I can make my life easier for myself, then it is probably going to make someone else’s life easier too. That is exactly how CoffeeCup was formed. I wanted to make my life easier. I had an intuitive sense at it was going to help others because they must be running into the same problems.

How did you finance your business?
I started with just a Master Card. I bought a $500 computer. I setup the computer in my coffee house and slept on the floor for the first year. I spent 24/7 focusing on creation and distribution of software. I took no financing.

What did you do with initial profits?
I wasn’t concerned with paying myself the first year, except for minimal stuff. When I had to make the first hire, I stockpiled cash because I would need another developer. I used the income I earned early as my bootstrapping money. So, I would “save, save, save,” and then hire to make more software. It was really a bootstrap deal.

How long did it take for your company to become profitable?
Within the first three months I was able to close the coffee house. I paid myself as much as I could, of course, I was keeping it really low. At the end of year one I had already made another two pieces of software.

How did your idea change throughout the process?
Originally I put it out for free. But a few things that changed. First, I had no idea how big the market was going to become. I made an HTML editor and that was all I planned to make. Then, a few months later, I realized there was a lot more opportunity and I need to make more software. My original intent was only making an HTML editor. But by the time I was done there were 35 pieces of software. That was a major shift.

Did you ever think of giving up? If so why?
I’m not a big fan of the “fail” methodology. If I were operating on a “fail fast” mindset, I would have been discouraged at month 3, and at month 6. When you are doing it by yourself, or only one other guy, you have all these aspirations to make a million dollars, and then you realize you can barely pay yourselves. That can be discouraging. I don’t have a “fail” bone. I say to myself, “I am going to ride this out as far as I can for as long as I can before it fails.” When I start something I don’t start believing its going to be successful, I start believing that I don’t want to fail. I always keep this little “fear of failure” thing in my pocket. I don’t worry about it succeeding, I just don’t want to fail. That can be a major driving motivator. Sometimes it’s not healthy. I’m more concerned about paying the rent.

What was your initial role? What is your current role in the company now?
We didn’t use the word “startup.” Starting a new business automatically made me a founder. As business develops and you add more products and there are more revenue and profits which increase the amount of problems like taxes, accountants, insurance and employees. The role shift goes from Founder to CEO, and that is a hard transition to make. Founders have fun: CEO’s not so much. Then it becomes a daily process and a monthly process of watching numbers. Before I sold my business I spent more time during the last half, 5-6 years, hitting refresh and checking revenue and planning marketing and sales, than I did in the first half.

What are the most successful marketing techniques? Guerilla marketing?
Everything I do is guerilla. Try to spend least possible on anything normal. In 11 years I spent approximately $100,000 in total marketing costs. We did a lot of one-on-one marketing to our distributors like CNET and other download sites. We would take those guys out to parties, which was cheaper than paying for advertizing. In return, they would give us way better advertising spots than we could ever afford by being cool with them. I’m a big fan of contests. I’ve given away Super Bowl tickets, a Rolex, a Mercedes: I’m really big on contests. Surprisingly, that is cheaper than having a marketing budget. We would raid conferences, like crashing a wedding. We wouldn’t even buy tickets. We didn’t even look like we should be there. We handed out our software up and down every isle. I’d rather have a developer than spend money on marketing. It did take a lot of tricks to walk through the back door to get to the front door.

What is the worst advice you have ever received and why?
Well, to be honest with you I didn’t really take peoples’ advice. Our culture was a little weird. We used to talk about being in a petri dish. You were either in the petri dish or your not in the petri dish. We didn’t let much in and we didn’t go out of it. We were really making our own rules. I didn’t take much advice.
The best advice I got was to make it shareware and actually sell it and timeout the software. I remember that. It was from one of the founders of download.com. Besides that, we weren’t taking much advice. To me all advice was bad. If we ever heard it, it usually didn’t match what we were doing because the company was very rouge.

You were trailblazing?
If you want to call it that. If our attempts didn’t work it was okay because it was the internet. You could delete it and it goes away and its not a big deal. If you released software and no one bought it you could delete it and move onto the next project. We didn’t invest too much time in any one specific piece f software. We were developing software in really short amounts of time, the epitome of agile development or rapid application development. We would say, “if we add this feature…wait, lets just make it its own piece of software.” Every 2-week and 4-week blocks we were delivering another piece of software.

Which part of your job is actual work opposed to passion?
You’re mostly driven by passion, not by what the outcome will be. If you love what you’re doing you are probably going to get a good result. That doesn’t always have to mean money. Even today, CoffeeCup is pretty well known. We were trying to help people change their lives by using our software so they don’t have to work for the man any more. That made us anti-establishment. That drove our passion. All the people who worked for us were that way.
We didn’t follow any process. The smaller the team, and closer we are together, the more money we can make, and the more we can do what we believe to be the right thing, which was to make software cheap for everyone, so they don’t have to work for the man. If that was the mission, it was passion driven. It means 24/7 hours, but passion doesn’t have to be about hard work if your having fun. If you are having fun, it shouldn’t be work. So, if you find yourself thinking you are working too much it probably means you are losing some of the passion you started with on your first day.

How is the economy effecting your business?
I think that is product driven. During my tenure at CoffeeCup we went through the Dot Com Bubble Burst, and 9/11, and another stock market crash. Those were actually opportunities. When the economy is down people lose their jobs, which means more people want to do their own thing. More entrepreneurs and startups are born when the economy is down. CoffeeCup was there through a lot of the bad, but we made out better because of it.
If everyone has tons of money they will buy the expensive software, regardless of whether it works well or not. We were there for beginners and intermediates. It was perfect in goods times and bad. In bad we did better. That is an awesome market to be in: a business that is recession proof. I would always be looking for that.
There is a big difference between needs and wants. For example we need a car, we want a Mercedes. You are better off selling products or services that people need. “Want businesses” are hurt the most, not the “need businesses.”

What is your advice to future entrepreneurs?
First, find the thing that people need, not what they want. Second, absolutely do the thing that you are passionate about, not the thing that you think is going to make money.
Those are two super super important things. Right when you find the striking balance between those, that is when you will find yourself successful: worrying less about failing but knowing that it is still there.
Don’t drive for success: drive not to fail.

Reprinted with permission from 3DStartupNYC