Links: The Truth (and Myth) about passive income

I've also read The 4-hour work week and dreamed about relaxing on a tropical island while the money pours in... but the truth is that it's actually a lot of hard work to get to that stage.

The biggest myth surrounding passive income is that it's a "set and forget" strategy. The truth is that it does actually take a lot of work, up-front to get that ball rolling.

Nacie's article weighs up whether passive income is all it's cracked up to be.

Too many people read "four hours" and think that passive income is the *easy* path to success... far from it. You'll most likely get far more up-front cash coming in via a traditional entrepreneurial route. Sure, some superstars will hit it lucky up-front and be an immediate smash, but for most of us working-joes, "passive" is all about building over the long-term; and keep in mind that it will take a long-term effort to get a full-on passive cashflow. In the meantime, you'll probably have to start with a more traditional business or job until your passive streams grow enough to be sustaining.

Have a look at what Steve says if you want to know the real consequences of trying to take the easy route when launching your own business.

Now, don't take all this to mean that "4 hours" is all a lie. As far as I'm aware, it never states that you can make money with no effort at all - or that you'll even make more money that way than the traditional routes... It's quite clear that it's handbook about really useful ways of simplifying and delegating as many parts of your business as possible. The main point being that you are building a "maintenance free" business, rather than a "totally effortless" business.

It's definitely true that people *can* make passive income work this way. Just keep in mind that it won't happen overnight and it's won't happen with absolutely no effort at all.

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Anybody here have experiences with putting into practice what they found in "four hours" or any other version of a passive income stream? How did it work out for you?

MatchFounders hits 500

MatchFounders.com hit its first milestone today: 500 registered members. I'm pretty pleased with that, seeing as how it's been a part-time on-the-side project that started on what's basically a hackfest.

Still got heaps to do before it becomes a world-dominating site, of course... but I'm pretty happy with that amount of activity after only a month and a half. Enough to post about it on the matchfounders blog... along with our upcoming dastardly plans.

To stealth, or not to stealth

I've been working on a new startup with two other founders that I found at launch48 last year. I've already mentioned launch48 on this blog, but I haven't yet mentioned my startup... That's because we've been keeping it quiet until recently... when we had a kind of "trial launch" at the previous launch48 weekend (in June).

Now, based on my reading on the matter (see links at bottom), I don't believe that "stealth mode" is actually a good way to go about building a web business. I think the reality is that if you've got a good idea, not only will it not instantly be stolen from you, but you'll have to cram it down people's throats before they take any notice...

But you see, I have two business partners. One of which is a strong believer in protecting your IP - and the other wanted to make peace between us... so we compromised and kept a lid on our idea until the trial launch.

Now, we're fairly new to the game, and we think there's a good idea in our startup, but it's no iPhone. It's not something people are screaming for and they aren't going to start beating path to our door immediately. Because of this, I was never afraid of people "stealing our idea" - because, to be honest, it just isn't sexy enough. When I explain it to people they go "oh, ok, cool I can see that... did you think about doing Y?" I've never seen a gleam of greed in their eye, followed by hasty notes scribbled down... and I never expected that this would happen.

So in my opinion, I don't see a big reason to keep it quiet.

Instead, I think it's important to get exposure to your idea as early as possible from people Out There in the Real World... that way you immediately get to see whether people think your idea is actually worth spending eight months of your life on... or not. This is simply my own reasoning behind Seth Godin's Ship it philosophy.

Stealth mode redux has some interesting case studies on which "startups" do and don't need to stay quiet about the product they have in production.

What I see most clearly is that stealth mode is mainly useful for companies that are large and already have a big audience... or who have enough funding to keep them going while they beaver away in secret on a product until it's perfect... ie companies that aren't actually startups.

The problem is that real startups - the tiny, self-funded groups of new founders - can't afford to be in stealth mode for very long - for the very simple reason that they do not have enough capital for long periods of development.

I'm not talking about people that slowly hack away doing a few hours every week while working a day job... I mean real "cash flow positive from day one" startups, rather than ones that require such extended self-funding.

Such things need to start gaining revenue asap, and the only way to do that is to attract customers... and the only way to do that is to tell everybody about them!

In the interest of balance, of course, there's a great post pointing out that releasing early is not always Good - which covers some of the reasons why *not* to release early... and they're all very fair points. But I'd argue that all of them point to a new variant of Einstein's famous "make it as simple as possible, but not too simple" ie:

"Release as early as possible, but not too early"

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Update:

After having read The small man builds cages for everyone on The art of non-conformity, I'm convinced that NDAs and other stealth-measures are a cage-building habit.

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Notes

Links on stealth-mode being bad, or the philosophy of "release early, release often":
Startup lessons learned
The Cathedral and the Bazaar

More links on stealth mode:
why choosing to go into stealth mode could be the kiss of death for your startup
Does Being In Stealth Mode Damage Your Business?

Launch a startup in 48 hours!

Launch 48 teams up business-gurus and techies, where the aim is to pitch, plan and launch a viable web-product in the following 48 hour period. It's 48 hours of hard-slog startup-founding that is guaranteed to leave you buzzing (honest)

I've been twice now, and just signed up for a third time. It may sound a little crazy... but it is an awesome experience, and I confess I'm now addicted.

If you can make it to the conference (on the Friday) they also line up a set of speakers from some of the best IT companies in the world (google, paypal, et al), along with VC, successful IT businessmen and other assorted useful types to give a talk about how you can turn your idea into reality.

and it works too. Several of the startups have gone on to become successful online businesses... of course some don't but I can honestly say I've learnt a lot in the process. I even met my co-founders there, so I can attest to the benefit of working with people to see if you can work with them...

Early bird tickets are on sale for the next one (the 25th Sep)... so I hope to see you there :)

PS: just to make it clear - I'm not affiliated with launch48 in any way except for having gone along to it (twice now) and found it to be awesome!