As side hackers we spend a lot of our time chasing the evergreen pastures of SaaS land and recurring revenue from our software or info products! I took a rather different approach to bootstrapping my side project to $3k a month in recurring revenue, and it wasn't even with SaaS! My target market was the arcade industry, both operators (people who put games in public to make money) and collectors (people who put games in their basements).
This is the story of growing 86Pixels, an arcade engineering company from nothing to a little bit of something.
Arcade Games? They Still Make Those?
Back in the 90s, arcades were more popular than ever. When I was a kid, there was nothing more exciting than going to the bowling alley or to the mall so that I could play games in the arcade. From Bad Dudes to Final Fight (how many times is Jessica going to be in trouble?), I had a blast plunking my entire allowance worth of quarters into these games. However, my absolute favorite game to play was pinball!
By the end of 1999, all of the pinball manufacturers in the world had dwindled down to just one, and the future wouldn't look good until about 2012 where three new manufacturers joined the ring, and there was a resurgence in game purchases with the introduction of home/basement arcades or barcades.
Where Really Complex Technology Meets Fun
The average pinball machine has over half a mile of wire inside of it and, until about 2005, was written in assembly on a microprocessor that has been produced since the early 70s.
These machines are complex to build, and moreover, complex to program from a systems standpoint. For example, you have to program to the timing accuracy of a few milliseconds which is far different than standard web or mobile application development. Also, you have to make sure that the operating system can survive sudden power offs and remain fault tolerant in the field. Remember, a lot of these devices are designed to make people money, so they have to be reliable. Seeing company after company fight these same battles was my opportunity.
How I Identified My Target Audience and Sold to Them
I began building custom games such as a re-theme of the 1990s film Demolition Man as a holographic "Pinball 2000" machine, which required custom hardware and software. I built that and shared it with the world. I posted my progress on YouTube, I posted on pinball enthusiast forums. I posted in places that I was already frequenting, where people already knew me.
Over time, as new companies came in to market to the same individuals, I was approached by those companies to build software for them. My passion projects were my first steps at building a reputation within the industry. More importantly, I sold to companies, not consumers. Now, pinball collectors tend to have deep pockets (with the average machine costing between $4,000 - $5,000), but they're still higher maintenance and more price-sensitive than dealing with the manufacturers. This is generally the case in any industry.
When these companies build their games, often times they're writing and testing software on higher end computers (like Macbooks). However, you can't afford to put something as powerful as a Macbook into a machine if you're building 1,000 units. So, my job was to develop a system that would run on low-cost hardware. We're talking an operating system that consumes less than 20 megabytes of precious RAM that you want to leave for the game itself. Game developers can do wonderful things if your software doesn't get in their way. I also had to make sure that the production environment mirrored the development environment.
Quite literally, my value proposition was "I can offer you a solid operating system setup that runs on lower cost hardware." The reality was that if I could deliver, this would basically be free money for the customer if they were making a few thousand games. I offered the company a clear cut value proposition.
After I onboarded the first two companies, selling to others became a lot easier. Calls instead shifted from "Time savings of X and features of Y are why you should care" to "We're used by two of the largest game manufacturers in the world, and they're saving thousands on manufacturing and support costs." The proof was real, because people in these industries talk. Now we're used by five major game manufacturers across all of their product lines, we're making about $3,000 a month through completely passive income. We sell to them on a per-game license, so in perpetuity, for any game they make that uses our operating system framework, we get a cut.
Moving Onward and Upward, shooting for $6k
Obviously $3,000 a month is not really a full-time income, but in such a niche industry, it is indeed an accomplishment that is worth noting. Niches can be insanely profitable. Build for a niche and then move upstream if you're bootstrapping.
In order to reach our goals and double revenue, we're expanding into other amusement manufacturers from everything to bill change machines to skee-ball. All of these things have a need for lower-cost compute hardware while offering enhanced interactivity. We also plan to experiment with selling products directly into the consumer market to add enhancements and custom functionality to their games. We first focused on establishing a brand and a reputation doing a small thing really really well in a niche industry. Now it's time to make much larger strides, and it is coming much easier thanks to the groundwork we laid in the beginning.
TL; DR
- When bootstrapping, sell to communities you're already involved with if you can. It cuts down on the initial sales friction exponentially.
- Pain is extremely lucrative if you're selling aspirin.
- Focus on a niche, and do one thing really really well. Do it so well that people just have to talk about how great of a job your product is doing.
- Make customers feel like rockstars. It makes them want to talk about your stuff.
- The idea wasn't new by any stretch. We just took an existing idea and wrapped it into a niche and hand-tailored everything to the problems that arcade engineers face.
Feel free to post any questions in the comments below!