

Ask HN: Is it really this easy? - rfnslyr

I&#x27;m browsing startups near my area and what I&#x27;m seeing are a lot of startups that are based on previous big ideas, just applied to a very niche market. Ideas that I&#x27;m sitting on the subway and thinking to myself, &quot;Hmm that&#x27;d be a cool idea&quot;, and then I discard it two seconds later. I have hundreds of ideas written down, and I am so quick to discard each and every one of them as silly because who the fuck would use any of these apps I came up with. Then I see the list of startups and what they are all about and I weep.<p>How do these companies get funding? Why do they get funding? A majority of these startups don&#x27;t have a very unique ideas and it doesn&#x27;t look like many are really making a difference or increasing wealth.<p>How do startups work? Do a lot of these just get initial funding, get an office, work on their stuff, and if it doesn&#x27;t succeed, it just shuts down?<p>I&#x27;m honestly a bit confused at how the startup scene works as I have a great idea and I&#x27;m pouring my blood, sweat, and tears into it. It&#x27;d be lovely to have a small team to work with and I&#x27;m wondering how do these people get SO MUCH funding? It seems that every second company I&#x27;m looking at has been funded through the roof.<p>I&#x27;m genuinely curious how it works as I&#x27;m trying to get my own business going. Can somebody shed some light into the process?
======
tptacek
Working to obtain external financing for a startup is a miserable experience,
even for people who are good at it, and for most of the kinds of ideas
software people have for companies, usually results in a situation where (a)
you have worked your ass off and beaten extraordinary odds simply to land
yourself in a situation where you are working a job for a boss and (b)
assuming all the risks and liabilities of working at your own company but with
incentives that are now tailored for financiers.

External funding for startups has a place, but we'd all be better off if it
wasn't glamorized to the extent that it is. The more money you raise, the
worse problems (a) and (b) tend to be, with the possible exception of extreme
cases where revenue growth and customer adoption are so clear that the glamor
of having raised is less than that of having started such an amazing business
to begin with. Most companies that raise good-sized A rounds aren't like that,
though.

It doesn't have to be that way, and if you're wondering how anyone would go
about getting a company funded, it shouldn't be that way for you either. Start
your company in your spare time. Scale down the ambitions of your product so
that you can accomplish it with the resources you have now. Prove your idea on
a very small scale, and, as you gain small amounts of traction, gradually
expand your ambitions, which will now often track your returns on running the
small business. At some point, you'll be making enough money and have enough
apparent upside that it'll make sense to quit your day job.

~~~
alok-g
Where do you find companies that do not restrict side projects in their
employment contracts? All the ones I know of set their employment contracts so
tight that they may have copyright over the comment you [1] just wrote.

[1] I do not really mean you specifically.

~~~
tectonic
In California companies are much more limited about what they can claim to own
of your (unrelated) side project.

~~~
alok-g
Previous discussions (including information about California):

[https://news.ycombinator.com/item?id=5210732](https://news.ycombinator.com/item?id=5210732)

[https://news.ycombinator.com/item?id=2208056](https://news.ycombinator.com/item?id=2208056)

Summary: It is not so simple.

------
patio11
In general, talking to customers, shipping software, and selling things to
people for money strictly dominate either thinking beautiful ideas or
wondering what alchemy would hypothetically make your startup fundable. If
you're really, really interested in that question, I can explain it in detail,
but I would bet against you liking the answer, so I'd suggest
talking/shipping/selling rather than spending more time thinking about what
other people are doing.

~~~
rfnslyr
It feels to me that a lot of these ideas are hackish and serve only the
purpose of getting funded, an easy money scheme. There are genuinely
unoriginal ideas. An image host. Like hundreds of other image hosts don't
exist? Why did you get funded?

I don't understand. When I think of ideas, the perspective I view the idea
from is whether or not it solves a significant problem in daily peoples lives.
A lot of these startups, don't solve anything.

I'm interested in your extended response regardless of my stance.

Is it just guys that have too much money and fund startups hoping that 1 in
100 of the funded ones will eventually make them billionaires? That's
currently what it seems like.

~~~
patio11
There are far easier ways to get money than raising money for a startup. If
two founders raise, say, $500k, under most circumstances they'll work a lot
harder and earn a lot less than just working for Amagoobooksoft as engineers.
(Remember, it doesn't magically become _their_ money. They'll be expected to
spend it on employee salaries, and employees are much, much more expensive
than anyone who doesn't have employees thinks they are.) I wouldn't get too
jealous of their lot in life, because it will cloud your judgment.

 _Is it just guys that have too much money and fund startups hoping that 1 in
100 of the funded ones will eventually make them billionaires?_

Again, you're letting sour grapes color your perceptions here. Broadly
speaking: "Make lots of bets, lose lots of bets, but have some money invested
in [without loss of generality: Google]" _is, in broad strokes, the model_.
Note that there is no reward for being original. Google wasn't. ("Another
search engine? Please. And their portal is much worse than Yahoo's.") Facebook
wasn't. ("So it's like MySpace but with 1/1,000th the users? Great idea,
Harvard dropout.") etc, etc.

In terms of what makes a startup fundable:
[http://venturehacks.com/articles/unfundable-
startup](http://venturehacks.com/articles/unfundable-startup)

In general, with exceptions which would be pretty obvious to a hypothetical
founder if they applied, a hypothetical founder is fundable if:

\+ They are located in proximity to investors who routinely fund companies
like theirs

\+ They are addressing a market with potential to make $10M ~ $100M (seed
stage, angels, and early VC funding) to $X00M a year in revenues, at a
minimum.

\+ They've got a team who "look like winners", for very subjective versions of
that. Graduated from a good school, worked for one of a few firms with known
high hiring bars (AmaGooBookSoft, etc), had a high-impact role at a previously
successful startup (first hire or first VP engineering at a company which
exited or is a shoe-in to do so, etc), etc etc.

\+ They are clearly capable of shipping great product. What makes a great
product? Um, investors "know it when they see it", but suffice it to say that
high-caliber design is very big right now.

\+ Traction. In brass tacks: $X0,000 of monthly recurring revenue or millions
to tens of millions of free users but _growing fast_. Less at early seed
stage, but you should ideally be able to demonstrate it in micro-scale. (e.g.
If you can show $1,000 of ad spend got you 4 customers and their LTV is
probabalistically above $1,000 then you're in a _much_ better position than if
you can't, even if $4,000 doesn't really ring any bells for investors.)

Now, let's contrast this to a hypothetical guy. Guy has big dreams. Guy
probably has not shipped a product. If Guy has shipped a product, Guy got 20
people to look at it once, but no one still uses it. Guy lives in the Midwest.
Guy graduated from a respectable (but not name-brand) school. Guy worked has
worked the last few years as a freelancer. Guy has not convinced a second guy
to join him on his crazy adventure. Guy has an idea which Guy thinks is
awesome but which Guy has not succeeded in actually selling to 10 customers or
instantiating on the desktops or home screens of several thousand users.

Guy will have a _very, very_ difficult time raising funding.

~~~
rfnslyr
_Now, let 's contrast this to a hypothetical guy. Guy has big dreams. Guy
probably has not shipped a product. If Guy has shipped a product, Guy got 20
people to look at it once, but no one still uses it. Guy lives in the Midwest.
Guy graduated from a respectable (but not name-brand) school. Guy worked has
worked the last few years as a freelancer. Guy has not convinced a second guy
to join him on his crazy adventure. Guy has an idea which Guy thinks is
awesome but which Guy has not succeeded in actually selling to 10 customers or
instantiating on the desktops or home screens of several thousand users. Guy
will have a very, very difficult time raising funding._

Stabbed me right in the heart. Pretty much what I'm doing now. Thank you for
the article and your response.

~~~
tptacek
That's not a penetrating wound to your chest you're feeling. It's just gas.
You shouldn't want to get a company funded. You should want to build a
company. If you have initiative and drive and perseverance, _which you 'd need
anyways to succeed at a funded company_, you're in a lot of ways better off in
the Midwest working outside the pageant system.

Want a couple of examples? How about me and Patrick? I'm in Chicago, and
Patrick lives in the Tulsa of Japan.

~~~
rfnslyr
It's just you hit the nail on the head and perfectly described my situation.

Right now I'm working on a mobile labour job marketplace with a low barrier of
entry. Jobs like snow removal, cutting grass, simple errands. House owners can
post a task, set a schedule for that task, and set a monthly budget for said
tasks. Workers can view these tasks and areas, sign up for the task, at which
point the house owner would review that workers profile to determine whether
they are a good match. I like this idea because it would enable people to make
quick money (teenagers, jobless people) and it would simplify the process much
more.

I think it's a great idea and I'm spending every second of my time researching
and developing, I'm really excited about this and I really think it will take
off.

So that's my situation, just working on a prototype now.

I'm not crying about not being funded, just wondering why so many mediocre
startups are funded. Thanks for your response!

~~~
nekopa
Far be it for me to jump right into the fray between you and the 2 highest
karma rated people on HN, but here here are my 2 cents:

MVP: focus on one aspect of your idea and just do it. From the ideas you gave
above, I see winter and summer MVPs (snow removal, grass cutting) If you have
a site ready to go now, go for 'www.grassbegone.com' and get a site out
matching grass cutters with lazy home owners. Do the research while executing.
If you don't have a site ready, spend the next few months developing
www.snowbegone.com, learn marketing (from patio11 - hint, you're not charging
enough) and launch at the end of autumn and corner the snow removal market.

Neither will get you funded _now_ but I would bet money that what you learn
would put you into the section of Guy who is now able to get funded.

Or you may end up like patio11 and make your millions without needed funding.
Or you could end up like tptacek rich, acerbic and full of knowledge.

~~~
IsaacL
I was reading this very interesting thread, and had to jump in here as well. I
actually worked (briefly) on a very similar idea last year - basically an Exec
clone for the UK. We scrapped the idea after a month, since we realised that
you're basically competing directly with existing service firms, and the
unique niche of a "mobile tasks marketplace" is tasks that are:

\- not doable by a specialised company (cleaning, gardening)

\- have a physical component (else they could be done by a VA)

\- are more efficient to outsource than do yourself (which seems to rule out
pretty much everything)

I came to the conclusion that the only way to go would be to build a
specialised services firm, which seems to be what Exec has done (they now seem
to just do cleaning). Which is cool, but maybe I'm missing something, since I
don't see how they're really a tech startup as they don't really leverage tech
in the way that Uber does. But straight services firms make tons of money
anyway, so Justin Kan deserves applause for persuading pg to invest in a
cleaning company.

Anyway my points to grandparent are:

\- I agree, figure out a niche skillset first, then expand

\- don't get seduced by the "on-demand mobile workforce" element. It sounds
cool, but your target market probably doesn't care about cool. You have to
answer the question "who really wants a dogsbody to do generic tasks?"

\- Though the social aspect of this kind of business is nice, nailing the
supply side is really easy. Unskilled and semi-skilled labour is really cheap,
if you haven't noticed. 90% of your focus should be on nailing the demand
side.

\- read everything you can get your hands on about Exec/TaskRabbit/all their
many clones.

\- agree with parent's plan. Most local services firms probably suck at online
marketing. If you can figure out a way to reliably get online customers for
service X, you can then go to all the local firms that offer service X and
offer a 10% affiliate deal. I'd focus more on nailing the marketing channel
before the product (SEO, AdWords, whatever works - find out if there's
underpriced search terms like "best window cleaning firms in Cambridge" and go
from there).

And yeah, I've become a big fan of the patio11/tptacek approach. Just need to
put it into action myself...

------
dirktheman
I believe there are two powers for seeing the umpteenth smiling kitten-apps
getting funded.

One reason is the team behind the app has already proven its worth. So while
the angel or VC probably won't be crazy about the idea, he/she will count on
the fact that the team will either get acquihired by another, bigger fish, or
will pivot into something with better chances of success.

The other power is that for every smiling kitten-app you see on TC, there are
hundreds that won't make it. You just don't read about them, so you're biased.
It's comparable to aspiring actors moving to LA, where they end up serving
meals.

The truth is getting funded is hard, even harder if you're new to the game,
and damn near impossible if you're new and haven't got traction (read: users)
yet. I suffer from the same idea-overload as you. But I force myself to write
the ideas down, and keep working on something until I finish it.

So my advice would be to pick an idea you're passionate about, keep working on
it relentlessly, and cut down on reading tech news.

~~~
jamesbritt
_So my advice would be to pick an idea you 're passionate about, keep working
on it relentlessly, and cut down on reading tech news._

OK, great, but what if there is no market for it?

This advice sounds just like, "Do what you love and the money will follow."

I'm deeply skeptical. It sounds like magical thinking.

Somewhere is this are all sorts of assumptions about marketing and sales that
just sort of happens.

~~~
rfnslyr
Not at all. The more projects you have attached to your name, the more you are
worth. If you spend two years writing apps that don't go anywhere, but you
finish them, and you can preview them, and you throw them on your portofolio
and market yourself you can land a really good job.

I really don't see a downside, this _is_ the worst case scenario.

~~~
jamesbritt
_... and you throw them on your portofolio and market yourself you can land a
really good job._

The whole point of this is to avoid having a "really good job" and to have a
_business_ instead.

I had no problem getting really good jobs. I can get one today. I no longer
want to work for other people.

~~~
rfnslyr
Godspeed!

------
wensing
This reminds me that I'm due for the next post in my 'starting Stormpulse'
blog series, wherein I cover how and why we raised significant money 6 years
after we started.

~~~
kevinchau
Would love to read this.

~~~
wensing
See LMGTFY link above.

~~~
wensing
No snark intended. Just lazy, sry.

------
jamesbritt
_I have hundreds of ideas written down, and I am so quick to discard each and
every one of them as silly because who the fuck would use any of these apps I
came up with._

I think the only way to know the answer is to ask people. I've made the
mistake of spending time building a product that I and my co-founders really
liked, but we never actually _asked_ (in one way or another) if anyone else
would pay for it, or even use it. We assumed that because we wanted it that
others who were (we thought) like us would want it too.

I have some other ideas for products but before I put too much effort into
them I want to go talk to potential customers and see what they think.

I dread this because I'm not naturally gregarious, but I cannot count on my
gut feelings about what people will pay money for.

~~~
rfnslyr
You need to put yourself in your target markets shoes. You have to close your
eyes, visualize their day, visualize their life, and see how it ties into your
application and whether your application truly solves their problem.

I have maybe 5 apps I use on a weekly basis on my phone. If another app is to
make it onto my phone, it better be a great solution to an existing problem.

Asking people if they would use your app is pointless since there is no
prototype, and its hard to summarize all the nuances of a complex application
in a few sentences, you'll almost always get a shrug and an "Sure, I'd use
that" which I really don't think suffices as a basis to build your application
on.

People will almost always say "Yeah, I'd use that" because it doesn't actually
exist yet.

Find an idea, see what problem is solves, and fly with it. Better yet, just
try to solve your own problems, don't think about whether it will make you a
billionaire. Worst case scenario is you have a cool project you were
passionate about and can add to your portfolio.

"The very best startup ideas tend to have three things in common: they're
something the founders themselves want, that they themselves can build, and
that few others realize are worth doing." \- Paul Graham

Great essay by Paul:
[http://www.paulgraham.com/startupideas.html](http://www.paulgraham.com/startupideas.html)

~~~
jamesbritt
_You need to put yourself in your target markets shoes. You have to close your
eyes, visualize their day, visualize their life, and see how it ties into your
application and whether your application truly solves their problem._

Or go talk them and not guess what their day is like or whether your code
solves their problems.

 _Asking people if they would use your app is pointless since there is no
prototype_

I first want to know what their actual problems are, not what I naively assume
them to be. And I would not discuss a potential program in the abstract, but
get feedback on something concrete.

 _Find an idea, see what problem is solves, and fly with it. Better yet, just
try to solve your own problems, don 't think about whether it will make you a
billionaire. Worst case scenario is you have a cool project you were
passionate about and can add to your portfolio._

Thanks, but I did that. It was fun, I learned a lot. Didn't pay my bills. I
have a lot of fun projects to keep me busy. What I want is an income.

"Follow your bliss" and the endless variations of that are trite.

Passion may be necessary, it's certainly a goal, but it isn't sufficient.

~~~
rfnslyr
_Or go talk them and not guess what their day is like or whether your code
solves their problems._

Yes that too, but in a broader sense.

 _And I would not discuss a potential program in the abstract, but get
feedback on something concrete._

Good.

 _" Follow your bliss" and the endless variations of that are trite._

If you want an income, develop iOS apps. My cousin started writing really
simple apps that cost 99c and he's been making a steady 4k a month. Use that
money to buy you time to work on your stuff.

When I was talking about 'worst case scnario', I meant it will add to your
portfolio, help you become a better developer, and help you land a job.

~~~
jamesbritt
_If you want an income, develop iOS apps._

OK, but now we're far away from just pursuing passion. Now it's do some work
for the money so you can afford to do the things you really care about. Which
is fine. I suspect that's how it works for most people.

I'm curious, though, how _you_ managed to achieve a successful business. Did
you have to work on things you didn't care about in order to fund what
ultimately became a self-sustaining company?

Did you manage to create a successful product by imagining the problems of
others and offering a solution?

Do you have recurring revenue, or is it one-time sales of a product?

~~~
rfnslyr
I made money through a lot of sketchy black hat SEO endeavors. Things like
content farms, making specific product pages from Amazon categories and
working off referrals. Affiliate marketing. Legitimate SEO work.

All of that shit crashed. It was too much to maintain, but it was fun while it
lasted.

Right now I saved up money from my job, quit it, and I'm working on my
business. I live off of $600/mo total. $350 for tiny room in a place with
roommates, $150 for food, rest for transportation.

I have not achieved anything remotely close to a successful business. If I
ever need money for rent or food, I'll do a freelance gig or two.

It's shitty, but we're all going to make it brah.

------
sharemywin
I've read unless you'vew already had a successful exit it hard to get funidng
without traction. This artical talks about how much traction you might need.
Also, assume your target market needs to be at least $100 million.

[http://bestengagingcommunities.com/2013/02/09/how-much-
tract...](http://bestengagingcommunities.com/2013/02/09/how-much-traction-is-
enough-to-get-seed-funded-or-to-get-into-an-accelerator/)

------
lazyjones
> Do a lot of these just get initial funding, get an office, work on their
> stuff, and if it doesn't succeed, it just shuts down?

I'd assume that a lot of these do it in a different order: they work on their
stuff (a prototype) first, then get funding when they have something to show
off.

(that's how it worked for me anyway)

------
mapster
If you have connections, use them. That's some money. Plus your own and from
your family/friends. Office, employee #1-3. Start shipping. You have the
appearance of a startup. Now getting a return on the money and time/work is
another thing. Good luck!

------
makerops
First question I think you should ask yourself: do you really even want to
pursue funding?

~~~
rfnslyr
It beats coding in my basement covering backend and frontend simultaneously.
I'd kill to have a good small team of a designer, backend developer, and front
end developer. That would be ideal.

~~~
mapster
You would trade 40% of your company for this?

~~~
rfnslyr
I'm not sure I understand what you mean.

~~~
mapster
Taking funding from a vc o angel comes at a cost - maybe 20 or 40% of your
future profits. Nice to have an office, hi end equipment, and a developer or
two. I am not judging, just pointing out the other side of the coin.

~~~
rfnslyr
Ah yeah, it's definitely not worth it then.

