
Ask HN: 5-7 months of living expenses left; terrified. Advice? - recession
In April, I left my job at a hedge fund. This was, admittedly, not the best time to leave a job in New York, but I needed out because the lack of purpose in my work was starting to affect my health.<p>Even though we didn't "technically" know ourselves to be in a recession, I knew something bizarre was going on that summer. I had some really surprising rejections. I never find rejection to be shocking, because even if you're really good, you might not be a fit... but I got turned down for in-person interviews at companies that would have been slam-dunks (for in-person interview) in mid-2007.<p>Anyway, I found my way to a really cool startup and began working there, the only downside being that pay would be deferred until we had funding. I was told that we'd probably have funding by November. I figured January - March was more likely, since PG's essays have educated me on the fact that funding matters are always a lot worse than expected, but I had enough savings from the hedge fund days to hold out that far.<p>It's January. I enjoy the work a lot more than I have at prior companies. The problem is that I have no control over the funding situation, and it's started to scare the shit out of me the minute we crossed into 2009. I only have 5-7 months of living expenses now (<i>fuck</i> New York's ridiculous housing costs). I honestly have no idea what I'll do if this doesn't pan out. I don't want to go back to Wall Street and might not be able to (there may not <i>be</i> a Wall Street). With an imploded economy, even a traditional job search is going to be risky and time-consuming. I don't have any contacts that could lead into consulting projects, and taking a typical software job (Java to implement some business guy's lame vision) is about as palatable as selling out and getting an MBA. I want to stay in technology, but working on cool projects and using decent languages (e.g. Lisp, ML, Haskell... or Python/Ruby at the very least).<p>If the startup gets funding, and it probably will, I'm fine. However, I'm worried about that 1-in-20 (?) chance that we don't manage to line up funding in time, in which I need to do a crash job search in an imploded economy and on shaky ground (and I don't want to do <i>any</i> job search, because I really like the startup and the projects I am working on). It's getting to the point where I hate spending money and I'm delaying necessary expenditures.<p>So, I'm staring down a 1-in-10 or 1-in-20 risk of utter disaster and now that it's 2009 I'm starting to get scared. Has anyone here been through disaster before? How did it pan out?
======
cperciva
_I'm worried about that 1-in-20 (?) chance that we don't manage to line up
funding in time_

You should be worried -- and if I were you I'd re-evaluate your odds. My guess
is that a startup which would print money would still have more than a 1-in-20
chance of failing to get funding at the moment.

Assuming you definitely want to continue with this startup (and think about
that carefully -- sometimes there's a reason why startups don't get funded), I
recommend doing everything you can to lower your costs. Yes, including moving
out of NYC: While gravitycop makes a good point about location being important
for getting funding, it sounds like you're not the person who is going after
the funding right now (based on the comment about having 'no control')... and
while VCs care where a company is based, they aren't going to care much if a
few employees live in the suburbs.

~~~
mattmaroon
Your startup doesn't have a 19 in 20 shot of being funded AFTER you get a term
sheet.

~~~
Eliezer
I realize this is a cheap shot... but... 95% probability of a startup being
funded? You didn't work on the software that rated mortgage default
probabilities, did you?

~~~
mattmaroon
creditdefaultswap.com baby. Web 2.0 mortgage derivatives.

Elevator pitch: It's like Flickr for collateralized debt obligations.

~~~
Eliezer
I think you should have just kept that idea quietly to yourself. Forever.

~~~
mattmaroon
Don't worry, when I get rich off of it, I'll tell everyone you inspired the
idea.

------
mochi
Something that I haven't seen mentioned: deferred pay is a huge problem in
startups. Essentially, the founders are asking you to take venture risk with
your salary, but they're not compensating you for that risk (I'm assuming
they're not paying you 30% interest on that deferred amount.)

Letting them defer your pay actually encourages them to wait as long as
possible before raising a new round of funding, because the money you're
lending them is far cheaper (financially) than the money they would get from
an investor. Meanwhile, the longer employees work, ringing up deferred comp,
the more desperate they get to have the company succeed in raising its next
round.

It's a really, really bad combination.

I think the rule has to be, if you're an employee, you should expect to get
paid like an employee (i.e. now.) If you are taking risk like a founder, you
should get equitized like one, not simply "repaid" your deferred comp. Put
another way: you're basically investing that deferred comp in the business,
but you're not getting paid for taking that very large risk with your money.

~~~
skmurphy
This is really good advice, I think it understates the downside risk of
deferred compensation.

The investors may balk at applying their funds to deferred compensation,
asking the founders to re-spin the employment agreement to convert the
deferred compensation to common (or options) prior to the investment, further
diluting and deferring it.

Why would the founders do that? They would be faced with a choice of no
funding or new funding applied to salaries going forward.

------
llimllib
> I don't have any contacts that could lead into consulting projects

This is the problem! You need to do some networking; and I don't mean in some
sleazy marketroid way.

Go to barcamps, meetups, language groups, hacker groups, photo meetups, or
whatever floats your boat. Get people's twitter names and keep up
conversations with them. Go to the bar with them occasionally. Make friends.

If you do this for 5-7 months I guarantee you'll have plenty of connections by
the time you need to get a job, and you won't have to spend any of your work
time doing it.

~~~
brandnewlow
Great advice.

Actually, it doesn't even take 5-7 months. Just start e-mailing people working
on stuff you like. Go to a bar camp and be above average socially, get a
speaking gig there if possible. You'll be good to go.

------
vaksel
cut your living expenses...have a car? sell it for a beater. Have high rent?
Move to Bronx or Brooklyn or Queens or Jersey City(if your work is close to
penn station). Or if your parents live locally, move in with them(I did this).
Switch to a ramen diet....stop going out, stop buying shit. Stretch every
penny. You won't believe how little you can live on, if you cut out all the
bullshit.

Start working on your contacts...you have 7 months to build connections...so
that if shit hits the fan, you have somewhere to go fast.

~~~
asnyder
It's likely he doesn't have a car, most New Yorkers don't. I'd also recommend
switching to a fruits and vegetables diet, instead of ramen. There are enough
dedicated fruit stores in New York that make fruits and vegetables cheaper and
healthier than ramen. In New York, an example of this kind of store would be
"Three Guys From Brooklyn", or "Circus Fruits". With these sorts of stores you
can easily bring your food expenses below $60 a month while maintaining a
healthy diet.

~~~
ryanwaggoner
_With these sorts of stores you can easily bring your food expenses below $60
a month while maintaining a healthy diet._

Is that a typo? $60/mo eating fruits and veggies? I live in SF and I have a
hard time imagining doing that here, let along NYC...

~~~
sh1mmer
You have to know where to go, what to buy, and what to cook.

I've been a vegan for a number of years now and I could live off $60/mo if I
wanted to. The main point is convenience. If you don't want the effort of
preparing food then it costs a lot more. Simple staples like lentals, rice,
etc supplemented with vegetables is a crazy cheap way to eat.

In SF districts like the mission it's easy to get cheap fresh fruit and
vegetables. A lot of it is supply and demand. If you shop at Safeway they have
an expectation about your spending and price accordingly.

If you are trying save every penny shop where other people who have no money
shop. That probably means neighborhoods you might avoid otherwise.

~~~
sown
Please, tell me some of your secrets. I'm interested in cheap living/eating.
:)

~~~
sgrove
Sounds like an excellent topic for a blog post - very hacker related, I would
think.

~~~
racyrick
Stick to Superfoods!

Quinoa, Lentils, fresh veggies.

Jason Rohrer (of fame with game programmers) eats lentils for lunch every day.

------
ars
What will you do after 5-7 months? If your money did actually run out what
would you do?

Whatever that is - do it now, not in 5-7 months.

For example: say you'd stop paying rent, and get evicted, where would you go?
Whereever that is - go there now. What else would you stop paying for? Phone?
Cable? Pretend you have no money, and act that way.

As a side suggestion to where to live, see if you can live in the startups
building (do they have an office they can give you?), and put your stuff in
storage.

~~~
jyothi
Great advice. A friend was in a similar situation. I started suggesting he go
frugal on everything. When you are running out of gas 5-7 months will happen
in a jiffy. Ensure you have more run way like get the 5-7 to 10-12 at least
and then either do one of these:

a) Leave everything and bet on getting funds

b) Ditch funds and bet on execution to start breaking even on operations.

------
YuriNiyazov
Relax. I have no problem living in New York on $3K/month gross pay. That's
36K/year. Since you are working at this startup for essentially free, you
should be able to convince them that you actually can only afford to work
there 3-4 days/week as opposed to 5-7 which is what you are probably doing
right now. If you free up some time, you will be able to find some
temporary/part-time consulting work doing database admin and website updates.
Meeting people that need this type of work need is relatively easy -
craigslist, twitter, meetup, etc. as other posters have indicated. The only
thing that you might compromise on is how much sleep you are getting, but from
the sound of it, that's not a major issue for you right now.

~~~
DTrejo
If he were to take your advice, maybe you could elaborate on the less obvious
ways of saving money?

~~~
YuriNiyazov
I should probably qualify my original post by saying that I don't think I
could live on 36K/year in NYC indefinitely. If I didn't have the low-paying
job, my runway would disappear in 5-6 months just like the OP. As it stands, I
take about $250 out of my runway a month, which means it will last much
longer.

I don't really know of "less obvious ways" - what I do seems to me fairly
obvious.

1) Rent - I pay $620 a month for a room in Brooklyn that fits my needs in a
large apartment where a lot of other people live that's 20 minutes away on the
subway from Manhattan (where I would assume the OP works). That's fairly low
by anyone's standards, and I intend to keep it that way. I know that if I were
to move further out (or, let's say, move out of NYC) I would be able to get a
larger place for that kind of money - but the point is that I don't need a
larger place, so the "per-square-foot ratio" doesn't bother me at all. I have
my own room. Ambient noise coming from the living room or from someone else's
room is sometimes an issue (I live with musicians). Earplugs or headphones
solve that.

The utilities are split between everyone in the house, the addition is fairly
negligible.

1a) This is a somewhat unhelpful generalization, but it has been my experience
that someone who was working for a hedge fund in New York is usually not the
type of guy that will easily get along with a bunch of pot-smoking musicians
that live in a recently gentrified but still somewhat ghetto neighborhood in
Brooklyn. However, the OP left and became an entrepreneur, so his soul may
still be intact.

2) Food - there was a post sometime ago on how do startups minimize on food
expenses. I believe PG's quote was "Rice and beans. There's about 1000
variations".

3) Dating - don't go to expensive restaurants where you are going to lose $150
in one night. A coffee in a local coffee-shop and a walk in the park or on the
riverfront - $10, and you are going to have a better time anyway.

4) Sell all your old computer equipment. That old IBM X31 sitting on your
bottom shelf that you replaced with the MacBook Pro? You can get around $300
for it on craigslist or ebay.

5) This is an anti-saving tip, but will work in your favor in the end - don't
compromise on health insurance.

6) Clothing - I have maybe 2 or 3 outfits that are "date" or "interview"
worthy. The rest are crappy t-shirts that I have from college.

There's no silver bullet, to paraphrase Brooks. It's like optimizing your
software: you look at what your most expensive expenditures are (profiling)
and you try to minimize each one of them in order.

~~~
giardini
Beans and rice are fine for awhile. But when you get hungry for meat, find a
park, lay out a net and a handful of that yummy cooked rice. Those city
pigeons will gather round. They are very fat and tasty! Yummm! Relevant posts:

[http://blog.wired.com/wiredscience/2008/07/does-pigeon-
mea.h...](http://blog.wired.com/wiredscience/2008/07/does-pigeon-mea.html)

Or, if you don't want to be caught with a net see
[http://www.associatedcontent.com/article/127077/a_profession...](http://www.associatedcontent.com/article/127077/a_professionals_guide_to_catching_pigeons.html?page=2)

And here are some posts on trapping, dressing and cooking them:
<http://www.survivalistboards.com/showthread.php?p=206758>

One post says pigeons were good city fare during the Great Depression.

------
nickfox
Take a deep breath and relax. You've chosen to be an entrepreneur because you
can't stand working in the 9-5 slave trade. Good choice. You are taking a big
risk. It's exciting, it's scary, it makes you feel alive! What a great
feeling.

Let's take a worst case scenario. The company fails, you lose your apartment
and car and are unemployed with no money. What then?

Well, you have a million choices. You are young, smart and live in America.
You wake up the next morning at your parents house and go get a job at Home
Depot or 7-11 to make ends meet (or back to wall street if you can stomach
it), you start saving and planning your next venture and work your way from
there. You've gained valuable experience and you are _living your dream_ ,
something that most people _never_ do.

In the mean time, enjoy yourself. Feel the fear, which you will, and forge
ahead. In your spare time keep working on improving your skills. Listen to CDs
by Anthony Robbins for encouragement and strength. It sounds like you are
doing great and remember, the bigger the risk, the bigger the reward. Don't
fear failure, that's just part of the ride.

------
curiousgeorge
You should assume funding will not happen. Follow your intuition here. And
then calm down and realize that 5-7 months of living expenses isn't exactly
scraping by. Follow everyone else's advice on cutting costs, and look for
part-time work.

Your deeper problem is the expectation that someone else will invest in a
company with a large team, obligations to cover back pay, several months of
development behind it, and no road map to profitability. If your company is
pinning its hopes on a long shot instead of figuring out how to get a revenue
stream, that is your problem right there. How it gets solved depends on the
company. The standard way is called bankruptcy.

~~~
ellyagg
> You should assume funding will not happen. Follow your intuition here.

That's following your intuition, not his. I agree with yours, though.

------
pedalpete
You say you don't have any control over the funding, and you didn't mention
how large the start-up is, but maybe this is somewhere you could take some
initiative. Would the founders let you get involved in the funding?

The reason I ask is that I assume from your experience with the Hedge Fund,
that you probably have more financial expertise and contacts than the
founders. Maybe they even cut you in for more.

------
green
I can hardly speak for everybody, but I know for sure: 1) life is too short
just to work for nothing 2) shit happens 3) may be your business model need to
be concentrated on profit now, less on investment

------
oakmac
Aside from the obvious advice to keep your expenses as low as possible, I
think you might consider a change in attitude. You are playing a game with a
positive expected value, but the rules of the game are such that payoffs are
very large and very rare (if you've read The Black Swan, think Extremistan).
Unfortunately, the game of "paying my rent check" and "eating on a daily
basis" follows a different set of rules. You've been allowed the privilege of
taking a risk due to your savings; once they are gone you will be playing a
different game. When that time comes you may just decide that "some business
guy's lame vision" is a decent alternative to being hungry on the streets
coding Haskell. The choice is up to you.

Also, stop feeling scared and terrified (your words). These emotions are not
helping you in any way.

------
quellhorst
Rule 1. Work for people who can pay.

Rule 2. See rule 1.

------
rgrieselhuber
Move to Thailand and chill for awhile. It will help you get your priorities
back in line and that 5-7 months (if based on NYC living expenses) could last
a few years.

~~~
fauigerzigerk
What about the visa? My experience is that cheap countries get incredibly
expensive if you need broadband and a reasonably secure neighbourhood. Or are
you talking about living in a hotel on a tourist visa? That only works for 3
to 6 months and I'm not sure it's possible continue working for a NY startup
whilst in Thailand.

~~~
rgrieselhuber
We stayed in Chaing Mai for about a month, had broadband access. The people we
were staying with were renting a large house for about $400 a month. You can
take a weekend trip to Cambodia or Vietnam and get a renewed visa when you
come back. Or travel around SE Asia in general. You can do that indefinitely
and it's quite cheap, even in relatively urban areas. Definitely cheaper than
NYC(!)

~~~
fauigerzigerk
OK, but if you're only staying for a month, the air fare is going to ruin your
budget.

~~~
rgrieselhuber
It's not that bad. I think we flew for about $80 round trip. There's always
the trains too. :-)

~~~
fauigerzigerk
$80 is indeed great but the train is much more exciting ;-)

~~~
catch23
Why not try India instead? The national language is English so it should be of
little problem, plus everything there is super cheap. Buy a bicycle for $10
brand new and there's your transportation.

~~~
fauigerzigerk
How much does it cost to rent a small appartment with broadband in a secure
neighbourhood in India?

------
critic
You could have mentioned what your startup was. Free publicity. Also, people
here might provide some input about whether the odds of getting funding really
are 90-95% for your type of startup.

I strongly recommend spending part of your time (one or two days a week)
looking for a job to hedge your bets.

------
tptacek
If your current startup is 5-7 months away from a funding event (which may get
less and less likely as the recession grinds on), consider that you may just
be in the wrong startup: 3 months could be enough time to jump start something
else that could actually be cash flow positive.

The standard answer, to consult, is probably the right one, and you are being
wildly pessimistic about your chances of finding a sustaining consulting
project. But once you start down that road, your current startup will suffer
for it.

------
wheels
As everyone else has said, don't bank on funding.

I think starting to put feelers out for consulting work is probably the best
strategy. Even though we've got a bit more runway, some customers and some VCs
that have approached us, I've been trying to do the same for the _what if_
case.

The upshot is if you can organize enough cash to keep yourself running through
the downturn and do just enough consulting to stay afloat and start growing a
revenue stream, if your company is still alive on the other side of this
downturn it'll have cleared out a lot of the market and it'll put you in a
pretty good position to try to raise a round if things are rosier in a year or
so or if you can keep costs low to make a transition to living off of the
revenue.

That's been the focus of the planning that I've been doing for us at the
moment: "How do we make sure that we're alive in a year, and how much revenue
will we need at that point to be self-sustaining."

------
indigoviolet
Another option is to interview at some companies with the understanding that
you'd only be available after, say, March. What are your skills? (I can try to
see if people at my work are interested).

~~~
skmurphy
Interview and get the offer, then you can make a decision about whether to
accept.

------
Tichy
Finding contract work is not so much work, especially if you are willing to
code in Java. Personally I dread the day when I will have to do so again, but
it is better as starving. Plus, 3 to 4 months can pay for the whole year.

Just check the typical sites, I had good experiences with jobserve.co.uk (they
don't only cover the UK - but I am in Europe/Germany).

iPhone contracting seems to be quite popular atm, too. If you already have a
Mac, might be worth looking into. Personally I still shun the investment of
getting a Mac+iPod touch.

~~~
recession
Can you use Clojure for the Java work? I'd only do Java projects if I could
use Clojure as often as humanly possible.

~~~
Tichy
In general I would say no, but you can always get lucky and hit on a
"progressive" Java project.

I totally feel with you, but seriously, Java is not so bad that I would rather
starve or freeze to death than code in Java.

------
jhancock
5-7 months savings is above average I would guess. Here's what I recommend:

1 - Get out of NYC fast!! Find the cheapest place you find comfortable and
your 5-7 months savings will get you 12+ months. This does not need to be in
the U.S.

2 - So you like coding? Ok, but what if for the next 5 years the world won't
pay too well for coding? Are you prepared to get into other things?

3 - Don't Panic! Seriously. This is life, stuff happens. Find other things
that allow you to be happy. Be positive and start living CHEAP!!!

~~~
gravitycop
_1 - Get out of NYC fast!!_

How is he supposed to get funding, if he does that?

<http://paulgraham.com/startupmistakes.html>

 _2\. Bad Location

Startups prosper in some places and not others. [...] It's an interesting
question why cities become startup hubs, but the reason startups prosper in
them is probably the same as it is for any industry: that's where the experts
are. Standards are higher; people are more sympathetic to what you're doing;
the kind of people you want to hire want to live there; supporting industries
are there; the people you run into in chance meetings are in the same
business._

-

<http://paulgraham.com/startuphubs.html>

 _In addition to the concentration that comes from specialization, startup
hubs are also markets. And markets are usually centralized. Even now, when
traders could be anywhere, they cluster in a few cities. It's hard to say
exactly what it is about face to face contact that makes deals happen, but
whatever it is, it hasn't yet been duplicated by technology._

~~~
vaksel
that advice is for founders....which he is not

~~~
gravitycop
OK. I stand corrected.

------
iuguy
There's a lot of good advice here from other posters on living frugally which
is all good stuff and I highly recommend you take what people have said on
board about living cheaper. I'd like to make a comment about your situation as
a whole.

You left your job in April, that's May through to January where you've had no
salary. 8 months. You're looking at 'another 5-7 months' before funding in a
recession. In effect, what you're saying is that you're looking at 12 months
of unpaid work and wiping out your savings in the middle of an economic
downturn in the hope that you'll find a business investor who has the cash to
fund your deferred salaries, anyone elses deferred salaries (and if you're the
only one then you need to change that) as well as investment moving forward.

In any economic climate what you're suggesting doesn't make sense to an
investor, you need to either write that entire year's salary off or
drastically change what you're doing. An investor is not there to fund
salaries, especially backdated ones. If you want to move forward, you need to
find a revenue stream. If you can't find a revenue stream but want to stay
involved then you need to find a job and cut your involvement back.

The suggestion about Thailand makes a lot more sense than it first seems.
Moving to somewhere that costs a lot less to live with your current 5-7months
of new york money will give you a hefty safety net, you could take interesting
projects on as and when and could possibly retain some involvement in the
startup working from somewhere like Thailand, Morocco, Mexico or even the mid-
west.

I hope it works out for you, if you are determined to keep at this project
full time unpaid then you need to move out of NYC sooner rather than later. I
would advise that you reconsider your level of involvement as this is not a
profitable or revenue generating opportunity, which is what you need right now
and over the coming year.

~~~
recession
I didn't mean to imply that I'm 5-7 months from a funding event. I have 5-7
months left of savings. I keep hearing that funding prospects look good, but I
don't know for sure because I'm not directly involved in the fundraising,
which is good, because I'd probably have an aneurysm if I had to deal with
that. I'd rather work on Wall Street than be trying to raise money.

------
mikeyur
I'd try to contact other startups and see if they need freelance work done.
Instead of looking for another job, continue doing what you're doing and work
part-time elsewhere.

Email other startups and ask if they're hiring, tell them about your situation
and if you can pull your weight and do what's required I'm sure you'll have a
job in no time.

Can't think of any startups off the top of your head? Use startupwarrior.com
and map some that are close to you and start calling/emailing.

------
racyrick
Damn. You must have been making a ton of dough to save that much money. Kudos
to you. I think I've got about a 1 month buffer, maybe 2.

You can survive on Lentils and rice, toss in a little Quinoa and a lime and
you could go a few years on pennies. Of course, what you are outlining is that
you have a life to attend to.

Well, then get a job that pays or demand pay from your current job.

------
puzzle-out
Are you fearful of crashing and burning financially or just uncomfortable with
the uncertainty of the situation? (or both) The startup scene is certainly
uncertain at the moment - then again, uncertainty is its defining experience
anyhow. Learn to live with uncertainty - balance your work life with things
you know you enjoy and that are always there.

------
ksvs
One thing you could start doing now is lining up potential alternative jobs.
You could even start working part-time somewhere else. One good thing about
startups is that they can be flexible about things like that. And the founders
who recruited you can hardly blame you.

~~~
recession
How do you find (decent) part-time work in technology? That may be what I have
to do, but I have no idea how to go about it.

~~~
calvin
Ask friends. If you don't have friends in the local tech community, find out
what tech groups there are in your area and visit them. I don't know about New
York, but in Seattle there are dozens focused on every aspect of technology
you can imagine (Mac programming, Perl, PHP, security, blogging, computer
networking, business networking, et cetera).

I moved to Seattle two years ago and knew virtually nobody. I met a lot of
people through local groups like SaturdayHouse, Six Hour Startup, and nPost,
got to know people, and even found a job through a friend of a friend.

It can be difficult and take time to find the kind of employment that pays and
allows you the freedom to do what you love, but it is possible. I wish you
much luck.

------
mynameishere
I do believe there are minimum wage laws designed to protect foolish people
from such situations.

------
rguzman
Do you have any startup ideas? You could try starting your own thing via NYC
Seed.

------
alnayyir
You're an idiot for not staying and saving more money without being certain
you had other work available. Sorry, just saying. I have one month of living
expenses left involuntarily. Twit.

------
sam_in_nyc
Forget about your start-up and live it up for 1 month!

