One of the clearest mistakes I made that could have made the company opportunity cost profitable had I not screwed it up was that I was conserving capital while I had the opportunity to grow really fast. For a short period of time, because of a blog post someone else wrote, I had a huge waiting list. I was building servers one at a time, using the money from the first to pay for the next one. A lot of that waiting list dried up while they were waiting for me; There is a reasonable chance I would have been 5x bigger at that point had I maxed out my credit and bought servers all at once. And if I was wrong? if I maxed out my credit and went bankrupt? I'd still be better off than I was in reality.
10 years at 1/4 salary is... brutal in a way that bankruptcy isn't. (I think. I've never actually gone bankrupt.)
I guess my real point here is that you need to time box it. At some point, you need to give up. I've never worked with VC, but I would assume that it would act as something of a forcing function here. I think being disciplined about "always take a better job if you are offered one" might also work.
I had a 3:00AM conversation with Steve Jobs (long story) about something I was trying to do with Apple. This led to being invited to meet with an engineering and marketing team in Cupertino.
Without saying a thing, a few days after our meeting Apple added a link to our website from the first page of one of their main product pages.
Traffic instantly went from a few thousand hits per day to hundreds of thousands per day. It didn’t let-up for perhaps a year.
We were not prepared for this at all. It was a mad scramble to shift, pivot, adapt, evolve and attempt to rise up to the opportunity provided by this unexpected move.
I don’t think I slept for a whole year.
This was before iPhone times. Apple, among other things, was focusing on the applications of its product in the media-related industries. I launched a self-funded startup to develop hardware (FPGA, embedded, real-time image processing, software) for this industry segment. After a year of very hard work I was able to emerge out of the garage with a fairly sophisticated product that was very well received.
Only one problem: The product could work much better if Apple would only modify their newly-introduced Apple HD Cinema Display. I had already hacked the display and developed the modifications, I just needed Apple on board. I tried in vain to make contact with a number of people at Apple. I was getting nowhere.
My work schedule was nuts, pretty much 18 hour days, 7 days a week. That's what you do when you are launching a business, particularly if you put it all on the line and have no outside funding or support. Which means it was normal for me to be in the garage up to 3 or 4 in the morning coding, designing hardware, or just generally working on the product or business.
One morning, out of frustration, I decided to hunt down Steve's email address and send him a note. I found a plausible candidate and sent an email at 2:30 in the morning. I still remember the subject line: "Trouble doing business with Apple". That was followed by just a sentence or two which, frankly, I can't remember. Not much in the way of details. Clicked "Send" and went back to coding.
Around 3:00AM I get a short email back:
"What's the problem? -Steve"
I sat there staring at that email for some time. I finally decided that this was either someone having fun at my expense or the real guy. No harm in trying. I typed-up a couple-page response with as much detail as made sense and sent it.
I got a reply within thirty minutes or so. A couple of questions, which I answered.
The conversation ended with another short email:
"Thanks for reaching out. -Steve".
It's was 4:30 AM or so. No point sleeping. I couldn't.
Later that afternoon I got a call from a VP just below Steve. He said "Steve asked me to take care of this for him". We spoke for about 45 minutes. The following day he invited me to come out to Cupertino, meet with their engineering team, explain how to fix the problem and discuss a few other non-engineering items.
Fast forward to a few months later, I designed an iteration of our product per Apple's request and we launched it at the Apple booth during one of the industry events. Pretty crazy ride. Like I said in my prior post, I don't think I slept in a year.
Too often have I come in the next day and deleted all but four lines of what I was tying the day before. Sunk cost fallacy hits me less severely after I’ve “slept on it”. Maybe all those grandads were right.
I equate it to sailing in stormy weather, something I've done a bunch of times. It is important to know the general direction you need to go and establish a few goals, yet is it foolish to think you are actually in control. The ocean tells you what to do from wave to wave and you work hard to do as it desires while constantly pushing towards your desired outcome. It's an art, a science and, yes, a bit of luck never hurts.
That's the challenge of entrepreneurship. You can either let the ocean, the business, sink you by taking you off-course and causing you to make bad decisions and face dangerous circumstances or you can navigate what it puts in front of you every day as best as you might be able while also pushing hard to generally point in the direction you want to go.
Sure, there are cases where people get on that boat and the thing just pushes forward with favorable winds and it's go-go-go (Facebook comes to mind). Yet that's not what a typical business looks like. Most businesses are like the aforementioned storm. Which is to say: Hard work, uncertainty, fear, joy, trepidation, doubt, bad decisions, good decisions, bad luck, good luck and, maybe, if things align, a good outcome on the other side of the storm.
This is why I think --conjecture on my part-- groups like YC have found that multi-founder teams consisting of young people without prior business experience do better than single founders with the same life experience.
Anyone can operate when the weather is great and winds blow in the desired direction. Yet that's not reality. You are going to tear a sail or break a mast here and there. In these situations the right team can be much better than a solo founder, even if they lack life and business experience.
My best advice is to not use the past as a source of regret but rather as a source of wisdom. Failures hurt (I've had a few, I've been bankrupt, penny-less) but they are also absolutely invaluable if one is able to remove emotion and learn from them.
At the moment I am in the process of starting yet another company, this time in the vertical farming space. I can say, without a shadow of a doubt, that my failures in life and business have helped me and will help me along this new journey far more than the success I have enjoyed.
Don't dwell in the past, use it to make you a better entrepreneur in your next adventure. Make something that solves a real problem and give it all you got. If you are willing to navigate the storm the market will reward you for it.
...unless you left it out for a reason
Why is this short opportunity window unique? So you realized you missed this window but then the environment was already one where this "5x" demand no longer existed? If that's the case would it have been wise to ramp up that quickly? Maybe you did the right thing.
Where you’re correct is that people look at this in hindsight and say things like what I said. But in the moment they may think this is the big chance, hire a few staff to build them faster and get stuck with a bunch if liabilities when demand ramps down while they were hoping it would continue going up.
People who don’t believe in their business fail, some never even start. But believing your own hype is the best way to fail spectacularly and I expect it’s hard to see while it’s happening. Even as an employee I’ve looked back a few times and wondered what the hell I was thinking buying into a failed idea.
I’ve been on both ends of the stick and can honestly say it sucks to give advice that didn’t work out for someone, or receive it.
PG also says to aim initially for Ramen profitablity (cover your rent and food bills) and then stay there till you figure a way to grow exponentially. Which is what OP did.
It's a lot easier to hold a regular job than it is to take a business from idea to execution... as you well know!
> I was building servers one at a time, using the money from the first to pay for the next one.
Is that they were financing the purchase of each new server with the money that they got paid by their customers. So they had to wait a certain amount of time until they had enough money to build each new server. If instead they had bought multiple servers at once, on credit, they could have started serving more customers much faster.
I mean, there certainly was also a time aspect that was independent of that serialization, but a lot of that was also saving money. I mean, I personally argue that buying servers from parts is less time than negotiating a good deal on an assembled server, but we certainly could have gotten tested servers out faster if we were willing to shovel more money at someone. Maybe even if we still serialized the purchase.
If you were selling/leasing compute commodities you were probably more of a logistics company vs tech.
I don't think that they are mutually exclusive. Some products take a long time to get organic growth and some products have a narrow window where they could blow up.
Perhaps you should remind yourself that plenty of people in your age group have salaries that are less than 1/4 of a silicon valley salary, and they think it is normal.
Not if you're reflecting on how you spent the last 10 years.
One of the worst parts, though, was that I felt like getting my first job after working on my own company for a while was... much harder than it has ever been for me to get a job. Like getting a job after being unemployed for a long time, which felt like a huge insult after how hard I worked.
I personally think it's actually a much bigger risk to do this when you are young (I mean, if you otherwise have the opportunity, like I did, to work a corporate job that let you max a 401K) than when you are older, once you have maxed that 401K as a younger person.
I haaaate working for anyone else after tasting success, but my FAANG salary and 401k and stock options simply can’t match the 100 cold calls a day startup life
If you have a growing business making money it should be fairly straightforward to get a loan under your business name.
this is not my experience, not without a personal guarantee or collateral that holds it's value better than servers.
(Leasing servers was also an option that would have made sense then. Most of the leasing deals I was offered that didn't include personal guarantees were two year leases wherein I paid about as much as the servers would cost up front over two years. It would have made sense in that case, but it's super expensive compared to buying servers)
I've been down this road. I did not answer this question properly. Doesn't matter how much you believe in yourself, if the bank wants a personal guarantee, they dont really believe in your vision.
My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain.
My own personal view, if I could go back in time, would be to tell myself to go all in. I think it had a shot, and I needed to take that shot. I still think risking a bankruptcy to get a better chance at that would have been worth it.
I don't regret trying. I needed to try. And I think it was a near-run thing. I could have made it. I feel like there are several points here where if i zigged instead of zagging, I'd have done really well.
I just regret that I spent so long at it, without much success. A spectacular flameout involving business and personal bankruptcy after three or five years would have been far better for my long-term financial health than just slogging along at 1/4 wages for a decade.
If you are just trying to make ends meet, then yes, probably don’t go for it.
If you need access to working capital to hire more people, increase production, etc then it’s completely worth it.
For reference I founded a consulting company. We landed large projects. Had to pay employees to produce the deliverables, but did not get paid until later.
Basic math here is: Typically Net 30 terms. Usually have to pay a month or so worth of salary before hitting milestone to allow billing (then 30 more days to get paid). With $80k/mo in salaries we required working capital.
Even at the criminal levels that are charged for startup loans (plus personal guarantee) it is worth it when you are making 60%+ margins.
I have since paid down the loan and then sold the consulting side to focus on some products with a small in-house team. Funded for years at this point.
Plus once you’re in profit, your loan frees up capital for growth.
Don’t act like bankruptcy is bad, it’s a valid pathway and you should by all means use it instead of sitting in a hole for 5 years or more. But learn from it, don’t be that person filing chapter 7s every 7 years
That's a tale told by everyone who read books about business or took some MBA classes.
It is not the case.
You can only be guaranteed to get a loan that is collateralize by FCF. FCF loans are stupid because you pay interest on a loan that is given to you in the amount of FCF. If you already have FCF, the only reason to get that loan is to build a business credit history by, quite literally, paying for it. That credit history is irrelevant for next 5-10 years because conventional financial vehicles do not care about your credit history until it is about 10 years long.
That's why VCing is the thing. If you are small, you have growth and you have FCF, your rapid path forward is with VCs, not conventional loans
It feels a lot like 2005 all over again, easy credit that will wash up at the first hint of economic downturn (I had cards reduce their limits in 07 just because)
I’m surprised my approach wasn’t mentioned: bootstrap with consulting revenue. It’s not novel (it’s how 37Signals bootstrapped Basecamp back in the day).
The ideal way is to provide a service that aligns with the product so you can deliver under the same brand.
In my case I’ve consulted as a fractional Product lead since 2007 to bootstrap my product businesses. Consulting has allowed me to support my family and provided as much runway as necessary before the bootstrapped business could support me full time.
One criticism of this part-time consulting approach is that it distracts from the product. This is not true if you’re delivering a service that doesn’t compliment the business.
But ironically probably more than half the founders i know are in permanent fundraising mode for companies that probably shouldn’t have raised in the first place. I look at consulting as a higher probability form of fundraising and see time spent on it as little different than fundraising for the “traditional” angel or venture funded company.
1- my current company is https://www.savio.io
2- i do product management consulting through https://www.reemer.com
Rather than pulling the trigger as an event, it was a process: we funded some prototype work - paid ourselves to prove out some things. Then we moved one of our devs (of 5) over to it full-time. As it started to take off, we began to wind down things on the consulting side while simultaneously moving more and more resources over to the new thing, until we were all over.
It's always scary, and there's always a point where you just have to jump in, but this way made the risk feel much more manageable.
For instance, I run an LSAT prep business, and started with tutoring. This gave me a pool of users I was close to for feedback on whatever I was working on, and kept me close to the material.
Trying to do unrelated consulting is much harder.
1) It is hard, properly HARD.
2) It does not seem like it is fair to yourself - you might feel like you are not really giving yourself a proper chance, be it capturing the market, hiring the best possible talent etc.
3) It might make you more risk averse, as you are gambling with your baby.
4) On the other hand, it is not the low risk path either, so it sort of conflicts with #3. I mean that there are a lot of risks involved in raising capital at an early stage, but going the tortoise path has other kinds of risks. Also see #2.
5) Your type of market needs to support it, obviously. Low investment product, stable customer base. In our case, the customers are large semi-governmental organizations and in all of history we have lost just 1 established customer. This gives a lot of consolation that you are building a house, one brick at a time.
6) You need a lot of mental stamina - everyone else seems to be doing things more cleverly. Your buddies will move on to work for the big bucks and establish their careers, others might be busy burning through VC money. It will take time.
8) Sometimes an investor will come along and try to offer you their money. But it often turns out as if your are playing a totally different ball game. One thing I learned was to ask not just how many X they expect us to deliver, but straight out ask how many X-s their "family" or whatever expects them to deliver.
But in the end you might have a company that is actually self sustaining, fantastic people around you and customers that appreciate what you are doing to them. I consider myself lucky, though. Feels like all odds were stacked against us.
The fact that this isn't a fundamental requirement perplexes me. But I consider the generic silicon valley startup model a sickness. You sell your and the company's soul to VC's before you even make a dime at the expense of the people who sweat and bled for you and who you also promised stake, only to routinely get screwed by the VC's who get paid out first.
> * jump into bootstrapping full time while relying on
It can be done, but I don't recommend it.
> * bootstrap on the side while working a day job
This is what I did. About the time you're pulling your hair out because you don't have enough time in the day to follow through with taking people's money is a great time to finally quit that day job.
If you really want to make it you’ll make time. If you don’t, consider it an indication that you don’t have what it takes.
I recently negotiated with work to drop down to four days a week. They refused to let me do three days a week for the worst reason: my coworkers depend on me too much, so they need my butt in the chair. I tried it for a bit, but it's still nowhere near enough time to bootstrap my side project. So I decided to quit. I'll burn savings for a bit while I try to prove out my idea.
My wife knows she married a starving artist. I feel a lot older than I wanted to be when starting a family, but we're getting old enough that we don't have the luxury of putting it off any longer. I don't know if I'll ever be able to afford a house.
Am I failing your level zero test? Not everyone is a 21 year old college graduate with zero expenses or obligations. Saying it's just the "sorriest excuse for an excuse" and "you don't have what it takes" is just insulting. Real people have real time commitments in the real world.
It's totally ok to not be in a position to do this. In fact, it's arguably a healthier way of living. But it may still be an indication of failing that level zero test because you just aren't into it enough. Business is not the make-a-wish foundation.
I agree that not having time is a sorry excuse because it ignores that people made decisions on how to spend their time.
Yeah some people have to do silly things like spend time with their kids and make sure they are attentive to their spouses.
Let's be honest. Having what it takes is about whether you successfully sell the MVP you get built to happy paying customers and keep the momentum going. Simple as that. "Slogging" through the nights and weekends on an idea that doesn't have legs is a level zero test of being a glutton for pain. Don't mistake that for actual progress.
I doubt it. This is typical generic startup know-it-all bullshit.
There's room for some level of success outside of failing that "level 0 test", but there's also a lot of truth in those words too.
Wait... are you seriously suggesting that struggling to save the deposit for and then buying an overpriced house will provide a stable environment for your kids?
I also picked up a few consulting gigs (including one that was quite steady) and still do that now.
It's a fascinating story. He has several other iOS games besides A Dark Room, but none of them seemed to go anywhere. Glad to hear his business is doing better now.
I suppose there's always money in the Skyrim business model -- just port your one successful game to every platform ever :)
You may have a great idea and you want to do it because you believe its a great thing to accomplish.
Or you may think you want to maximize your net income, and do whatever it takes to do that.
I think the latter is better if that is what you want to do but only if that is what you want to do.
* Get your living expenses down to $1000/mo before you start your startup (this is just a target for the northwestern US, find your own where you live).
* Multiply all projections by 3. People will complain that you are being over-conservative and probably laugh at you or grow concerned. They might point to other companies that succeeded in such and such time. Ignore them just like they ignore survival bias.
* Divide revenue by 5 to 10. A repair business running at 30% profitability needs to gross $3 for every dollar it keeps. A restaurant needs to make 20x at 5% margin. Chargebacks. Refunds. Illness. Accidents. Countless life experiences can make it feel like you are treading water for months/years. Another way to say this is that each dollar you make in your startup is like making $5-10 anywhere else, so treat it with the reverence it deserves.
* Donate plasma. This is a form of prostitution because you are selling yourself for money, but you'll make an extra $300/mo. You'll get a glimpse of the value of human life and dignity inherent to an industrial society that's being denied to us all by the lack of UBI. It will also show you the true value of money because you'll see that retail service jobs pay 1/2 to 1/4 per hour what plasma pays. You'll learn how all money is blood money because someone always exchanges blood, sweat, tears or time for it (unless they are born into it like the people who most likely have it today). And if you aren't ready to put your life on the line in some fashion, you might not be ready to make the big sacrifices that running a startup demands, or even lead others.
* Learn The Secret (The Law of Attraction) and other mindfulness practices. It's not so much that they are real (my experience is that it's all real) but that successful people are likely to attribute their success to things besides luck. It's good to know how to speak the lingo and present a good appearance for networking, since your primary revenue stream will probably come from a human need you might not have expected.
* Find a romantic partner that believes in you. Short of that, work a good job for a while and provide for their needs for some number of months or years before your startup so they're willing to take a risk on you. Or reject this advice completely and be a loner for a few years. Most startups were started by geeks, so it might be advantageous. But if you succeed, don't be a douche. Nobody likes that you succeed. Many secretly hate you for it. Be magnanimous. Pay it forward. If you suffer in solitude or walk around like a self-help guru, you'll probably fail.
* Remember that the thing isn't the thing. Financing to get you to the thing is. Our entire system of western capitalism is at odds with your personal dream of being the next Steve Jobs or Elon Musk. And since all money is blood money, maybe you don't want that anyway. We need new heroes like, I dunno, Captain America. I think that there is vast untapped potential in ideas like cooperatives and communal stewardship of the things we care about. I've tried to adopt ideas like radical inclusion into my life. Maybe something in your belief system will lead you to a worthy cause and the funding to see it through. We all know that banks sure won't.
Well this post stinks but my gut seems satisfied that most of the nonintuitive stuff has been covered. Happy holidays everyone.
For background, I'm from the UK, where people donate blood, plasma and platelets, and AFAIK, it's illegal to sell such things. I read all kinds of things about US health care on HN, but this isn't something I've come across before. If true... I don't know exactly, it just feels very, very strange, especially for a "western" country.
For example, there is a scene in https://en.wikipedia.org/wiki/The_Pursuit_of_Happyness where the main character sells blood for money.
You can find several websites that mention this "money making strategy":
Selling plasma for cash is mostly done by very impoverished people. I used to live a few blocks from one of these businesses. The people you see hanging around the place would probably discourage anyone but the neediest from "donating."
Yes. An acquaintance who has a Masters in CS (but no experience so they're finding the job search tough) sells weekly.
For all purposes, I hope you are doing better now and things are working out for you!
Get by by donating plasma, presumably fail in the end.
You're not really selling me on this approach. I'm a bit anti "The Secret" by the way.
Reminds me of Led Zepplin.. music snobs will profess to how bad stairway to heaven is but love black dog or battle of evermore on that same album. They hate stairway to heaven because others like it. If the song was hated they would be the first to love it.
As far as the future goes, I just got out of a 4 year stint at one of the better consulting agencies in town so am back to contracting. I’d like to be part of something bigger than myself, with a grander purpose like ending labor as we know it. I believe there is a bright future in the gig economy and that eventually we’ll be able to work as needed, sustainably. Once we have something like a global jobs service so that labor security is always available, it will put pressure on corporations to raise wages. That should prop up the late-stage capitalism we’ve found ourselves in long enough that robot labor can take over when the singularity arrives around 2040 and provide UBI for everyone. It’s either that or dystopia.
With all these things, it’s hard to tell anymore if I’m talking about myself or the world. So I’ve been coping a lot and battling depression off and on. But I’m also grateful to be alive in such interesting times.