

Ask HN: review my idea for a consultancy/incubator [slides] - chrisduesing
http://app.sliderocket.com/app/FullPlayer.aspx?id=C04AFA19-DFE8-4D4E-CFC5-D6BF1FBAE3F8
I have been considering several ideas for how to get my next startup off the ground without going back to zero income. There are several options available of course, but I wanted to focus on something that keeps paying the bills from the get go and leaves me without investors controlling the company. The idea is inspired by 37signals success turning a consultancy into a product. This takes it to the next level, a cooperative incubator funded by part time consultant work.
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naval
I originally started my angel fund as an incubator (The Hit Forge). I quickly
moved away because of Adverse Selection - the best entrepreneurs are insanely
committed to themselves and their ideas, and rationally or irrationally, don't
want to diversify. Since then, I've invested in a lot of companies, including
Twitter and Disqus and Heyzap, and am glad that I did so. The Incubator model
works as a "search" model (MRL Ventures, Obvious Labs, Ooga) where the
Incubator "finds" a company that the principals join, but not as an
"investment" model where the incubator survives and keeps spinning out
companies. This is true because you can't create or replace entrepreneurs -
you can only discover them or be them, but you can't create them.

The other problem with this proposal is that the Internet is extremely
competitive. You can't do anything great part-time over the long term. A
funded team working full-time has a huge advantage on you.

Of course, giving up control sucks. "Valuation is temporary, control is
forever." And a business controlled by VCs too early can't innovate easily.
So, either raise money from angels, or learn how to negotiate with Venture
capitalists. Check out Nivi and my writings (sorry, shameless plug) at
<http://www.venturehacks.com>.

If you do have a good product with traction and are out raising VC money, ping
me and I'd be happy to help you keep control (free!)

~~~
aditya
So how do ramen profitable companies and "Italian restaurants on the web" (ie.
Small self-funded companies that fit a hugely profitable niche) fit your world
view?

They (37s, fogcreek, etc.) did start as consulting businesses and raised
little or no outside capital to build immensely profitable products...

~~~
naval
They can work but generally they tend to be service companies for a long time
before they become product companies. However, they're almost never done by
part-timers. Even 37S and FogCreek are full-time labors of love. Also, there
are always exceptions - I'm talking about mass statistics / average web
startups - stuff similar to most YC companies.

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apsurd
This sounds like you've read the 4 hour work week and then went to an MLM
recruitment meeting.=D

This not meant to be derogatory in any way, I do feel that you've put much
thought into this. That is just my impression of the concept.

I think in theory, this is great. However it seems to me like rather than one
person starting one business, you have "a team" starting multiple businesses
_on top of_ managing their partnerships. I'm all for collaboration, but it
seems to me like more work is being added, then taken out.

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chrisduesing
I don't really follow your first two sentences. I am interested in starting a
company that I remain in control of, or at least share ownership with the
other people doing the work, rather than having random people with money
telling me what to do. I am not familiar with MLM, but the 4 hour workweek
struck me as finding a way to do as little as possible so you could become a
globetrotting rich kid.

As to your final point, it is a valid one. Splitting ones attention between a
customer focused consultancy and a startup could well be too much. Ideally
each person involved is simply bringing their current employer in to the fold,
rather than going out and finding new customers they have no relationship
with. I felt this was something I could have done with most of my previous
corporate jobs, but it probably isn't universally applicable.

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apsurd
The 4hww reference is in regards to your plan _outsourcing yourself from your
day job_. As well as the 50/50 split of working on your own time, and
developing a business.

The MLM is in reference to: _founders convince other consultants to contribute
their bench time_.

Obviously I know you are not trying to run a mult-level-marketing outfit, but
I feel the implementation is similar.

I think your plan trivializes a lot of things. Mainly:

\- Outsource yourself from your day job

\- Start a startup

\- Teaming up with like-minded people as motivated as you.

\- Sharing profits "simply".

These are not trivial.

Also your main point is that you don't want you business to be dictated by
outside investors. But why is the assumption that anyone investing money would
be a detriment while anyone investing domain-knowledge and side-profits is an
asset? (as per your consultancy network).

I don't see how giving equity to people _more like you_ is any better or worse
than giving equity to outside investors. Equity is equity and if your main
concern is not giving up control of your business, you should not be dealing
in any equity whatsoever.

To me, you are trying to solve a purely business problem, but you are trying
to do it in a way that involves the product development/tech side. Though, I
have no idea if that is good or bad.

I am on board with exactly what you are saying. I want my own business to be
_my business_. But this is why I'm a DHH disciple. Sure its not 1,2,3 easy,
but the 37 signals way is COMMON SENSE, when it comes to business. So it
sounds like your goals are more business then they are tech; in that case,
start with the business side of things, and see how that fits into your tech
ideas, not the other way around.

(just subjective advice - honestly meant as constructive criticism: best of
luck)

~~~
chrisduesing
The goal of the post was not to trivialize the difficulty of accomplishing any
of these steps, simply to outline what I saw as necessary ingredients. If you
think any of them are insurmountable I would love to hear why.

To be clear, I don't really have a problem with the VC approach. I just see
most of the success stories in that realm as people who become fantastically
rich but lose control of their companies along the way. I am hoping to build
something that is long term, sustainable and leaves me in control of the thing
I created. I was not trying to imply that I prefer one type of person to have
equity over another, rather I hoped to share equity among the people who
contributed. The argument against VC money was wholly separate from the
argument for paying contributors with equity. The latter is because cash will
be tight and because I believe it is better to give people a stake in their
future rather than just a paycheck and a task list.

Finally, the idea that I am solving a business problem over a technical one
here is right on. I haven't really mentioned a startup idea. Previously, I
spent a year trying to get a company off the ground by myself (and failed
miserably). I learned that, for me, it would be better to work with others
towards this goal while leveraging their experience, talent and outside
perspectives. VCs can provide this as well, but at what price? This is simply
meant to be another path towards the goal of a startup, with different
sacrifices along the way.

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aditya
This would work if you can find the people to make it work, consulting isn't
really a "new" route to starting a startup and neither is using consulting
income to support it instead of outside money.

The real question is how do you find these "entrepreneurial" people and
convince them to join together with you for lower cash and higher risk than
they would have if they were working by themselves

~~~
chrisduesing
The novel part (I think) is banding together and using it as a formal startup
incubator.

I agree that the harder part is finding like minded people, which is why I put
the idea up here. If it resonates with this crowd I think it is worth
exploring further.

As for the risk, I believe grouping together lowers the risk. If each partner
brings in a client there are more projects to share, and economies of scale
make it easier to share resources and services. Speaking from experience, I
can say going at a start up alone is not an easy endeavor.

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sachinag
But not only do you have to like the other people, you have to like their side
projects, since everyone shares until ramen profitability. But most "side
project" ideas are terrible. It seems to me that you'd end up with a bunch of
megalomaniacs who are mediocre people.

I'm not trying to be a wet blanket, but this strikes me as an incubator (ugh)
where the inmates run the asylum. To me, the safest thing is still saving up
some money, having a really good idea, and finding some technical friends to
go "all in" with you for a year.

~~~
chrisduesing
The idea is that everyone is working on their own side project half of the
time. If other members of the team collaborate it is in exchange for equity.
No one is being asked to work on a startup they are not interested in.

Hopefully a group of entrepreneurs that are working together to create
startups are also helping vet each others ideas. Going back to other people's
comments, the team dynamics would be pretty important. If you think of your
partners as inmates in an asylum the whole thing is probably doomed to failure
no matter who is providing direction.

I actually have started a company with savings, which was enough money to
support one person (me) for a year. I doubt I could have found other people
who happened to be temporarily financially independent at the exact same time
and interested in my idea. This way seems more practical to me.

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jasonlbaptiste
Sounds sorta like obvious corp, except they didn't need to consult due to
being comfortable already. Get smart people together, build some cashflows,
and work on cool side ideas. See what sticks and what doesn't.

Also reminds me of Virgance.

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brm
midVentures are a bunch of University of Chicago and Northwestern alums who
have joined together to do almost exactly what you describe:
<http://midventures.com/>

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chrisduesing
Interesting, I was not familiar with them. I read the web site and it doesn't
really highlight if/how they bring in other entrepreneurs. I will have to get
in touch with them, or perhaps check out their next event. Thanks for the
link!

~~~
brm
Funnily enough I was unware you were from Chicago when I wrote that. Through
Jelly Chicago, I've come across several of these "lose band of entrepreneurs"
type operations here in the city

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jey
I'm currently working independently as a consultant, but I think it could be
neat to band together with other freelancers. Getting projects and
establishing a "brand" would be easier with more people and more project
volume, and we could match up projects to team-members according to their
availability and skillset.

I also don't think it needs to be tied to bootstrapping a startup.

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dpnewman
it seems that it ends up being a lot about finding the right combination of
consultants. i already do the 50/50 split between my consulting and work on my
vision project. and have been actively looking out for the right kinds of
collaborations. be nice if there was a web service that spoke directly to this
kind of linking "the 50/50 club" .. or maybe there is?

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edw519
I like your creative approach. My biggest concern is that any business you'd
start would probably be service business. I suspect what you really want is a
product business. You'd have to find a way to convert your service business
into a product business to scale. Good luck. That part won't be easy.

