

Ask HN: Where do I go from here? - davidfm

Over the past 7 years I&#x27;ve been building a SAAS. It&#x27;s good. I have 20 customers all from referral. They think it&#x27;s good. It has the potential to be huge. Currently, it earns me a low income - bootstrapping it&#x27;s development.<p>I&#x27;d like to raise VC to grow it. But the last time I did that, it swallowed a year and brought down a 25-man company.
I tried hiring a developer but didn&#x27;t have the cashflow to cover the time recruiting, finding offices and managing.
I&#x27;ve tried raising cash from friends &#x2F; family &#x2F; clients. That might happen yet, but it&#x27;s an incredibly slow and time-consuming process.<p>Can HN help suggest the best route forward?
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brudgers
So here's the question: would you bring in a 50-50 partner (both of you on a
vesting schedule) in order to scale and not merely grow? That is, would you
give someone half the company to triple customers in a year...or something
like that?

The last seven years is sunk cost and the only effect it can have on the
future of the company besides providing a knowledge base is psychological
drag. And bringing in a partner with large equity is exactly what taking VC is
anyway..except that VC will make decisions based upon distribution of risk
while a 5050 partner will have a similar concentration of risk to yours.

Overcoming the sunk cost mindset is tough. Just giving someone half a company
you spent seven years building sounds crazy. But the seven years you spent
getting to this point are irrelevant to VC decision-making. All that matters
is going forward. Any different orientation on your part creates an impedence
of expectations.

Good luck.

~~~
davidfm
Thanks for that. Interesting. Would I give up 50%? Yes - for the right return.
I know I can do much, much better than triple customers if I can leave the
technical debt to someone trustworthy. I accept that the last seven years is
sunk cost. But I have seven years of amazing customer relations - a network
that will flourish into $$$ when I have the opportunity to scale. I also have
a product. Maybe not the perfectly polished product that developers better
than me can make it, but <bias>It's Already Good</bias> and it will only get
better. At this stage, giving (say) 50% to a VC and using that to buy staff
(and ideally get accelerated growth via the VC's network) or giving that
percentage to a partner who will concentrate to the same degree doesn't phase
me. In my mind, they are each 50% of different values. The VC's investment
immediately values the business greater than it currently is. The right
partner does the same. I'm open to both routes. My problem is getting from
here to either of those positions without killing the business whilst
focussing on it.

Edit: just looked at your blog - my system mails checks and takes just a
little of that back every month :-)

~~~
brudgers
I used triple just because it's a low but obvious payoff for 50% equity.

The immediate problem is not lack of money but lack of staff. Taking VC means
turning up the heat on the lack of staff problem, and more money does not
identify the right technical candidate, and in my mind at least, you really
need a technical candidate who is partner grade and partner committed. Someone
without the commitment can leave behind perfectly good code in an environment
where those who remain were not close enough to its creation to quickly make
sound modifications...imagining what a person without technical chops can
leave behind in the code base is left as an exercise for the reader.

[Glad you enjoyed the blog.]

~~~
davidfm
OK, get your point on the multiple. Sorry, commenting on my business has me in
defensive mode!

I recruited and retained several top level devs in my 10 years prior to going
it alone. I'm not too worried about that bit. But thanks for making me think
about what worked well in the process back then.

~~~
brudgers
I'm not just commenting on your business, but commenting on the
internet...i.e. in near total ignorance. And not just that but telling you to
give half of it away like I know what I'm talking about and you with a family.

Anyway, I was in the parking lot about an hour ago and thought the right
developer might come in already knowing angels, vc's or 3F's.

~~~
davidfm
Thanks for the thoughts. Via another comment on here, I've made contact with a
couple of developers on CoFoundersLab. Who knows, maybe one of them might be
the right one. Cheers.

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vasudevan
There is no single best route. It all depends on the specific business you are
in and at what stage are you today.

To suggest a way, share more details about your product / company. Looks like
an B2B focused product. \- What is it? \- Howz the current distribution \- Who
are these customers (I mean type) \- Why has it took 7 years to get 20
customers? Is your product is very heavy to even evaluate? \- Why do you need
money and where will you put that (hiring, product development, marketing,
distribution, etc)

~~~
davidfm
Wow, thanks. It's predominantly ERP. Customers are top 20 from 1 industry
currently (the referral impact) but it's not limited to that trade. It's taken
7 years because I've had to earn a living while developing it and it's a
fairly large system. Money is for developer/s so that I can do sales and
marketing. What do you mean 'heavy to even evaluate'?

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david927
This seems to me to be right from the MBA textbook chapter called, "What
happens if you have no Business Development".

You need to get more customers (and not just from referral, though that's
great), and you need more buzz. When you get stronger demand, the capital
supply will more easily rise up to greet it.

~~~
davidfm
I know I can get lots of customers very quickly, I'm turning business away. My
issue is letting them down because I don't have the resources to support them.
(my previous roles were biz-dev, I do that well)

~~~
david927
If you're sure you can get the business to support it, then go to the bank and
get a loan. If you aren't able to do that, you're probably stuck slowly
bootstrapping. (You're asking for advice, but it's hard to really help because
you haven't given a lot of details.) If you have 20 customers after years and
it's not profitable enough to hire more developers, I'm guessing you'll have a
hard time finding investors. But I don't know. In all cases, I wish you luck
and hope you find what it takes to get lift-off. I know how hard it is.

Edit: You might want to take a look at
[http://www.cofounderslab.com](http://www.cofounderslab.com)

~~~
davidfm
I looked at cofounderslab a while back. Can't remember what stopped me
completing it then. It seems to have evolved a lot. Thanks for replying, much
appreciated.

Edit: CoFoundersLab looks really hopeful David. It's just gone down for
updates but I liked what I saw - thanks again!

~~~
david927
Happy to help! My email is in my profile if you have any questions at all.
Again, all the best of luck!

------
funkyy
Its hard to give you much detail based on information you have provided. 7
years seems a long time for company earning low income. Do you see yourself in
this industry in few years? Do you have possibility to grow? Who is your
customers - large companies, smes?

~~~
davidfm
I've been in the industry since 95, so, yes, I see myself here for the long
run. Wouldn't rule out an exit from this business if the opportunity arose
though. I believe growth potential is bigger than most of the super-inflated
valuations around right now. Current customers are larger end of SME but it's
not limited up or down - just been easiest to sell to!

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hackerboos
If you're after VC cash then you should plug your company every chance you get
including here.

I can't help you other than that but I will say that you should consider
remote workers if it's feasible.

~~~
davidfm
I've been trying to stay 'under the radar' but maybe you're right, could be
time to come out of stealth mode, thanks.

~~~
hackerboos
Stealth Mode is a bad idea unless you're somehow legally obliged to keep
quiet.

~~~
davidfm
No legal obligation. I should clarify, the industry that has been buying into
it knows me very well, I've not been stealth there. I've just started
focussing on another industry - they will know me well within 12 months. But
whilst I can't scale quickly enough to get early mover advantage I don't want
to draw to much attention to what I'm doing. Catch 22 I guess!

