Trying to get funding is described as "soul sucking" even by Paul Graham and in our experience this is a startup killing move. Very few people talk about mental health for entrepreneurs and for us the most challenging times was talking to investors. If a constant stream of people told you, your business was not worth spending time or money, after how many rejections will you start doubting your company and even yourself?
Investors asking for a stream of documents, asking us to drive down for partner meetings, arriving late at meetings, un-responsive to emails: They all take a toll on the startup and more importantly on entrepreneurs.
Getting funded is a rat race. You get the money and then clock starts ticking for sales, series A,B,C , 10x the returns etc.
The startup newsletter are full of wins, and VC fundings and "we are killing it bro" mentality but how often do we stop to talk about those that failed?
The failures of VC-funded startups (e.g. recently Juicero, Rethinkdb, etc on HN) are discussed more often than the failures of self-funded startups.
Also, as far as I can tell, a significant number (most?) of the startups listed at autopsy.io are VC-funded. In contrast, the self-funded startups that fail usually die a quiet death without discussion because they were never big enough to be mentioned in Techcrunch/Wired/Engadget/etc.
Perhaps the reason they died
The thing I live on today was Job Quittin' Sideproject #5. The first four died without ever letting me quit any jobs. Is #5 "survivorship"? Or is it "persistance"?
Let's say the chance of getting a business working, even for a smart guy, is only 10%. Does that mean you shouldn't try? Or does that mean it will take on average half a dozen attempts to make it work?
I like to think it's the latter.
Here's a bit that I wrote about all this a week or so ago:
I like "you gotta be in it to win it".
It's much, much lower, according to any reasonable estimation. For all startups, I've seen "less than 1%" on many occasions. That obviously excludes tons of failures that are never reported anywhere -- sometimes that are never even incorporated, despite trying to build/sell a product.
> Does that mean you shouldn't try?
For the vast majority of people, yes! "Try" has costs -- time, money, life, and relationships. To really try will often cost tens of thousands of dollars. Most people can't afford to gamble so much with such a tiny chance of success.
Are you thinking VC-backed startups, or maybe lumping them in to your calculation?
Remember, we're talking bootstrapped businesses designed for profitability. I think you'd be hard pressed to make ten real efforts in a row, learning lessons as you go, without getting one of them to stick.
For VC's, where "profitable and growing linearly" equates to failure, then sure, the odds are worse. But that's just another reason not to go that route.
tens of thousands of dollars
For what it's worth, the 4 big multi-year failures I reference above cost maybe a few thousand dollars total over the span of 10 years, and happened primarily in spare nights & weekends during the course of an otherwise active and non-ruined life. Most people who met me never knew it was happening at all, and no friday beers were missed as a result of the aforementioned bootstrapping.
If you decide to start a lifestyle business as opposed to a high-growth startup you may be more successful in terms of wealth and health.
They just don't want that other person to try, as if somebody else gets VC funding or launches a successful product, then it's less likely that you will be able to successfully do so, especially if you are in a similar space.
Talking somebody out of trying by convincing them that there is no chance of success is a lot easier than actually competing with them.
My own anecdata disagrees -- the people I know who give this advice are older people who have built a few companies and, likely, failed a few times.
That's also where I'm coming from. I lost $50k before I ever succeeded at anything, and it was punishing on my family, personal life, and long-term finances.
It's alarming to me when I meet people who idolize entrepreneurship and have no idea how risky and expensive it is. I meet people like this all the time, and I see them on HN from time to time, although I think HN is dominated more by people like me, who know that starting a company is gambling.
If you don't believe it's gambling, read about how good VCs are at picking winners (hint: not good). If even VCs can't pick a winner, how do you think an individual can objectively assess her own likelihood of success?
Venture capital is one of the highest-risk, highest-reward classes of mainstream investment. If you're starting a company, you are your own venture capitalist, at least at the beginning.
Nothing I've said is controversial or difficult to back up with facts, but it seems there are lots of rich/privileged people who think it's no big deal to lose tens of thousands of dollars and advise everyone to do the same, even though it's not feasible for most people.
I couldn't agree more that keeping your head in the game when nay sayers and sometimes downright jealous or mischievous characters get you doubting yourself. It is soul crushing.
The psychology of living in startup purgatory is where it's at.
Not seeking funding can also be soul sucking especially when it comes to hiring and you don't have enough resources to hire. Of course, if you're self funding, the ideal scenario would be to build something that doesn't require a lot of human resources and maintenance and cost, and run it as a lifestyle instead of an actual job.
- The amount that they will try to squeeze you and give you the runaround is highly dependent on the personalities and the resources of the team that you’re selling to; it’s not generally consistent across the entire company, unless you’re dealing with a central purchasing department (hopefully you’re not, except for processing your PO). Of course, it also depends on the amount of value that your product provides compared to their current or potential internal solutions, as well as your competitors.
- Getting paid promptly is much easier if you write your contract with milestones and require receipt of payment for a previous milestone before work on the next milestone begins. Invoice in advance so the “net 30” expires on the day you want to be paid, or demand “due upon receipt” terms.
> Your open source release should be a demo of the product, and no more. Give things away with the goal of eventually converting the users of the free software into paying customers.
Eh, I get it, but I also kind of dislike when people use open source solely as an advertisement. Either open source something useful or don't bother open sourcing it at all. A lot of smaller open source work I've seen is done by people who put a lot of work into making a cool tool who then want to share it with other people that may find it useful and use it for new and interesting purposes.
"If you buy some X number of seats of our software, then you get a copy of the source-code to modify and do with as you will (today as well as when we, the vendor, die, as vendors are wont to do), but this does not grant a license to more seats (unless we, the vendor, are dead), nor the right to redistribute the source-code.
N.B. We do not support your changes. Unless you pay us a goodly sum in advance. And even then, we really can't put SLAs behind outcomes."
Taking too much time on decisions is a good way to kill a new company. Many, if not most wrong decisions you can recover from, and it's very difficult to know what the right decision is beforehand. So a lot of the time the "right" decision is just to do _something_ to learn what the real right decision is and then do that.
As much as making quick decisions is valuable, its painful/permanent impacts to the group are high if they aren't flexible decisions, or aren't revisited.
Technical Research is critical. https://producthabits.com/everyone-forgets-technical-researc...
What is number #22 (sorry, English is not my native language)? Is he talking about clients that offered him a large licensing fee and gained huge influence over him for doing so?
This is a bit of a mind game. Confirmation bias and the sunk-cost fallacy being what they are, after a client makes what she sees as a large investment in you and your product, she has tied her success to your success.
I always find these perspectives and retrospectives useful and interesting. Different people always point out different things, because everyone's business is at least slightly different in one respect or another. (be it funding, customer base, product scale, product type, employee count, number of concurrent projects, how successful they were, etc.)
For example, the book "The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers" by Ben Horowitz provided good insight into managing larger tech companies and was enjoyable to read.
Specifically, I recommend checking out these articles: How Seth Godin Would Launch a Business With a $1,000 Budget, A Guide to Running a Minimalist Startup, How to Launch a Product With No Money and No Customers, How to Ship Side Projects.
For something a little more comprehensive, check out GrowthLab’s Ultimate Guide to Starting an Online Business.
I am surprised he seemed happy with his Valve experience but it is insightful of him to see that it taught him some good bootstrap lessons.
I had to google that :)
Funny it's 'x is chockablock with' rather than 'x is chockablocked with'
Clearly, the term "block" has nothing to do with the word, "blocked."
Say "no" when something feels wrong.
This implies that you can say "no"
- emotionally (you don't feel bad about it and you don't fear missing out)
- economically (you don't need that money)
Source: I've committed all three types of errors
Does anyone feel like reading articles has reached a point of diminished returns?
One Silicon Valley company that is well-known for not having a non-use clause is Intel. This means that they can use any confidential information in their own business, in any way they desire.
It's not problematic to sign an agreement like this with another startup because they are unlikely to have the time/money to start competing with you on your home turf. But big companies can squash you like a bug if they so desire.
Other reasons to carefully review an NDA:
Make sure it's bilateral, not unilateral
Check to see how long it's in effect for — usually the parties are permitted to disclose / use the info after 2-5 years
Make sure the above clause has an exception for trade secrets that are still secret (which they should not be allowed to disclose even after the expiration)
A more established eLearning company approached us to discuss potential partnering opportunities, and sent over their NDA. Note - I actually read NDA's and other legal docs before signing, to make sure nothing untoward or unexpected is included.
In the above case, they included non-compete clauses (without any limits) specifically so we couldn't compete with them.
Upon asking their (from memory) CEO "WTF?" he was rude/abrasive and that was the last we heard from them.
At a guess, they were just trying a cheap tactic to get leverage over us in some way.
Contract negotiation makes them fair. If you just sign whatever people put in front of you, you give up your rights to have a fair contract.
The contract given to you probably represents the opposing lawyers wish list of all the things they wish they could have. Most/some of these things will be extremely disadvantageous to you. Just signing anything they give you means you submit to their wish list, not your own.
Blindly signing subjects you to potentially nasty term, and obligated you not to talk about certain things. This in turn can be used as leverage by the other side if things go badly.
Really, it's just don't blindly sign any agreement. Unfortunately agreements are so ponderous (clickwrap) that most people are used to doing that
Saying 'required' makes it sound like you didn't have a choice -- out of curiosity, did they have other leverage over you above getting your help on their project, and did you attempt to negotiate on this clause?
I don't doubt that non-compete clauses happen in NDAs; other people in this thread to mention seeing them. But I think they're not that common either. I've seen my share of NDAs and never seen a non-compete clause. I do get non-compete clauses in employment contracts that also include NDAs as well as invention assignments and more, but I haven't personally seen a non-compete clause in a pure non-disclosure contract, that seems abnormal. But I agree completely that one should always read their contracts carefully before signing.
Effectively, the NDA gives big co the option to force small co to, at the very least, pay lawyers $50k a month until dead or the suit is resolved in two-plus years because the NDA and facts, at the very least, left a lot of issues to dispute.
Doesn't mean the article doesn't look insightful though.
> 7. If you have a product that a very large company really wants, they'll still do everything they can to delay purchasing it for the market price. They'll try to hire you or your partner(s) away individually, or they'll wait as long as possible to see if you encounter hard financial times and go under. They won't come and just offer to license your product or buy you out until they've exhausted all other possibilities.
This is the opposite of normal enterprise sales in my experience (we do HR software). If you are talking to the right person, and you have a solution to their business problem at a suitable price (not too high, not too low) then the very last thing they want to do is to kill the deal with these kinds of shenanigans.
Selling to programmers though is the opposite, and frankly is to be avoided at all costs.
I self funded two startups and the point about targeting small companies is a good idea.
I would also add using a subscription based service (even for development) is the way to go. You can charge a monthly fee for a group of services to smaller clients while development is ongoing with a list of milestones and achievements to keep the project on track while ensuring you have recurring revenue coming in.
If you get multiple clients, you can really set yourself up for success. Having 3-4K coming in every month on a regular basis can keep you afloat and reduce the anxiety of having to send out bill and then waiting to get paid.
Google doesn't come up with anything on this one, is there a different term for the same thing?
I've heard it used as argument against linux and free software.
@Rich Geldreich, you might want to link from your blog to your company website http://www.binomial.info/. I only say that because I didn't find a link and I had to google for it.
now you too can read the article!