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My Startup has 30 Days to Live (mystartuphas30daystolive.tumblr.com)
490 points by hidingmyname on June 25, 2013 | hide | past | web | favorite | 226 comments

I'm going to say this knowing that I may get down voted to heck. And I don't mean it as a "told you so" to the OP, but rather hopefully some cautionary advice for would-be founders.

I have come to the opinion that if you are bootstrapping, you have no business calling your company a startup. You are building a small business. And there is nothing shameful about this. You are among solid companions with your local plumbers, restaurants, and barbers. You make a good living building a sustainable business that is growing steadily but slowly, to serve a small group of loyal customers.

But you are not a startup.

Startups are about growth. About chasing metrics like 5% week over week. About going from 100 customers to 100,000 in a month. That is the reason you take VC money. It's not "I have this idea for a business, but I need some money to quit my job while I work on it". It's "I have an idea for a business that could be huge but I need to build it up fast".

So when I see someone bemoaning the advice they were given by their investors, telling them they should be meeting all these crazy metrics, I can't help but ask, what did you expect? The VC isn't in the business of slow, organic growth of your company. They are in the business of generating a return for their fund within a relatively short timeframe. The advice you get is their best effort to try and help you find "explosive" growth.

Before you sign your bootstrapped business on for investment money, ask yourself: is this business, and more importantly am I, really suited for massive, short term growth?

Ah, the "hacker/cracker" debate equivalent for software entrepreneurship, complete with the person who says other people have "no business" calling themselves something if they don't meet their specific definition of that something.

Bolted, of course, to the top of any thread that mentions "bootstrapping" or "VC".

This is more about an internalized understanding of the type of business you are building for the founders than it is about external perceptions. That can be difficult for some, particularly with the prestige we in this community attribute to the word "startup". But understanding the needs of your business and how you want to grow it are key. If you're thinking of your business as a startup, that massive growth is the only way forward, you'll make decisions like taking VC money. If you think of it as a profitable small business, with measured and planned growth, you can recognize that VC money may not be the answer for you.

I think we understand that you believe businesses that don't aim for shoot-the-moon growth shouldn't call themselves "startups".

The problem is, not everybody agrees with you. I've done both kinds of companies and don't think growth trajectory is the defining feature of a "startup". I'm also not particularly interested in debating the point, since it has very little to do with the story we're commenting on. (I also understand your rebuttal to that point, that the problem this person had was not understanding the distinction you're making, but I also disagree with that argument and find it a little mean-spirited.)

My only point is to offer hopefully helpful advice to the legions of folks who come to HN wanting to learn how to start their own business for the first time. Many unintentionally assume they need to operate like a startup to their own peril, when in fact they could have had a successful business if not for chasing that label. Certainly no intention of being "mean-spirited". The fact that it might come off that way likely speaks as much to the aforementioned prestige which we place on the term "startup" as anything.

I think creating a business can be one of the most rewarding things a person can do, and I want as many people to find success in that as possible.

All funded startups are startups, but not all startups are funded.

It is possible to create a business with a very ambitious growth trajectory regardless of whether you have taken VC or angel funding or whether you are bootstrapping. It's just a lot easier to do this if you've taken funding.

In the valley, most plausible ambitious growth trajectory businesses are VC-funded of course; this is not necessarily true elsewhere. As someone who has lived in the valley for many years and before starting a startup outside of the valley, it's easy to understand why: not all funding climates are created equal.

The thing is, your comments come off as extremely dismissive: the implication is that anything not-funded is a "small business", which is the equivalent of a pat on the head and "nice lemonade stand, son" (or, Italian restaurant, if you're DHH).

Finally: say a startup has a high growth trajectory and closes a Series A round. Was it a startup before it closed the round? I'd argue the investors thought so...

I think he actually means to communicate the opposite --- he's dismissing "startups" as he defines them, and chiding the author of the post for pursuing that model.

I wouldn't listen to tptacek. I'm not sure what he's going on about.

I found your comment(s) very insightful. Thanks a lot for posting.


If you're starting up you should be questioning the ROI on everything--and trying to figure out what it may be for a VC is part of that.

There's no free l(a)unch.

It doesn't appear that greghinch was harping on the semantics. He's harping on the frustration about investors getting to call the shots on feature X or schedule Y.

As I understand it, that's the startup game. If you want to call the shots and build your own dream, don't take the money.

Makes perfect sense to me.

Except it's not the startup game. Larry and Sergey got to call the shots with Google (much to their investors' chagrin). Zuckerburg got to call the shots with Facebook. Both of those were high-growth startups that took VC money. They got to call the shots because they were high-growth companies with a lot of leverage.

The startups where the VCs end up calling the shots are the ones that are on bootstrapped revenue and user-acquisition trajectories but with VC funding. You have no leverage in that situation, because they provided all the money and you're providing...nothing useful at the moment. If you're careful about taking VC funding only once you've validated the market and your ability to execute against that market, the investors don't even want to call the shots, because if they just let you be they'll make a whole lot of money for zero effort.

I don't think this distinction is anywhere near as trivial. VC-funded companies have meaningfully different qualities than those that are just trying to build up their revenues. The author failed to internalize this distinction, and it later made him unhappy.

People who break into computers are very different from people who build novel computer systems. The problem isn't the validity of the distinction.

Agree completely - startup is about growth - but there is a definite difference between a small technology company and a local barber or restaurant. A local barber or restaurant has a limited customer base. No matter how incredible or world class his haircuts are, nobody will fly from across the country to have their hair cut. A technology/internet startup is different. If the company is small and sticks to very slow but definite growth through a genuinely good product, eventually they can become an enormous corporation even if they weren't planning on it because anybody in the world can give them money for their value.

Intent is important, but the reality is that a slow growing internet company not focused on growth can eventually end up growing at 100% week on week simply because of slow improvement on product that provides value - 'startup by mistake'. A local barber can never have the same effect.

That's your definition of a startup. Most people (myself included) think of a startup simply as a new, fledgling business. Every business starts with nothing. Your aspirations, whether they are to become billion-dollar or just side income are irrelevant. They can lead to some bone-headed decisions along the way though.

I don't think he's arguing about semantics of startup vs. small business. I believe he's trying to explain that new businesses fall into a path where they think they are a "startup" thus must take VC funding. He's trying to explain that there's also the "small business" route where you just bootstrap and fund your business from customer revenue.

He's trying to explain that there's also the "small business" route where you just bootstrap and fund your business from customer revenue.

But funding from customer revenue does not automatically imply "small business". If you manage to generate a reasonable margin off that revenue, but you reinvest the profit back into the company, you can grow that way, as opposed to growing by taking outside money.

Again, it's not about semantics. Replace small business with whatever term you want. The point is that the blog writer built a certain type of business then tried to take it onto a different track that put pressure on faster growth and got in over his/her head.

A barber shop is a new, fledgling business, but it is not a startup. PG wrote an essay on this - you should read it.

And why isn't a barber shop a startup? Great Clips and Super Cuts were once new, fledgling businesses.

Not charging money, taking VC investment, joining an incubator, and creating a stupid name that ends in "fy" or "ly" a startup does not make.

BTW, I've read the essay. I like most of what he writes, but I have a fundamental disagreement on this one and just because it comes from the hands of PG does not make it gospel.

What does this mean, "designed to grow fast?" Only technology businesses can achieve overnight billion dollar valuations, so are we saying that anything that is not in the field of tech is not a startup? If you are aiming to become the next Google, Facebook, or Twitter, good luck to you but you're going to fail. Most businesses that drive our economy were not overnight success stories. Starbucks, Wal-Mart, and Macy's were once single store fronts whose founders were not aiming for "hocky-stick" growth out of the gate.

Ask John Paul DeJoria about what a startup is. The guy started by selling fucking shampoo to salons out of his car in Los Angeles when he was 36 and now owns Patron. Yes, the Tequila company. Watch this video for some perspective: http://www.youtube.com/watch?v=hndfUwPpzyQ

I completely agree with this. Web/Tech are not the only industries that have startups. However, I do believe the "gotta have it right NOW" consumer attitude that the tech industry creates also creates the same kind of tech-focused venture capitalist.

Couldn't agree more.

There's nothing to say a bootstrapped company can't become a a startup. When they start going for growth

Edit: See below, I was referring to accelerated growth

Self-fulfilling stereotype.

PG doesn't exclusively define the startup world.

Is there really any point in Github's development that anyone would've doubted it was a startup?

Please, just re-read what you wrote and tell me you're saying this with a straight face.

I should have prefaced it as "accelerated" growth.

But I stand by that.

I'm glad you changed your mind. Maybe you could make an amendment to your first post, if you really mean this. bootstrapped != not built to grow

You are free to disagree with PG. Doing so doesn't change the fact that he is the sort of authority who gets cited in Wikipedia articles on the topic. http://en.wikipedia.org/wiki/Startup_company

The term "startup" originated during the dot-com bubble. The very origin of the term means it is supposed to apply primarily to new tech companies who are designed to grow fast.

A barber shop is not a startup. It is a small business. This doesn't make it any less legitimate as a venture. It just distinguishes it in terms of the nature of its business and industry.

edit: if you're going to downvote, at least have the courage to voice your disagreement as a reply.

Webster says "a fledgling business enterprise," and sites as its first use 1845. [1]

Unless there's another dot-com bubble that happened 150 years earlier than the one I know about, I think you're pretty well wrong about the etymology.

Within the HN-bubble, people may define "startup" to be "VC-backed-startup, but the term does have a meaning outside of that bubble. I call my own company a "startup", and I have no plans to seek out a slot in an incubator or investment from VC.

[1] http://www.merriam-webster.com/dictionary/start-up

The term "startup" originated during the dot-com bubble.

Wow, you get some bullshit ideas about business if you get your mba at wikipedia.

I may have quoted it wrong. Wikipedia says it became popular during the dotcom bubble.

Let me try this again. When I said "Wow, you ..." I was really saying: "If all you're contributing is rephrased sections of wikipedia, perhaps you shouldn't be trying to sound like an authority"

Eh, I think you're dead wrong in every way, but I upvoted you nonetheless, since your post is a legitimate part of the discussion. I just don't agree with any of it.

It definitely pre-dates the dotcom bubble. I think I first heard the word in Inc Magazine in the early nineties.

Edit: Also, it was only during the bubble that you saw startups go from zero to IPO in two years, and moonshot IPOs were unheard of prior to Netscape. The conventional wisdom pre-Netscape is that you had to be profitable and growing for 6-8 quarters before the IPO. A "moonshot" IPO was one that bumped 10-15% on the first day. When Boston Chicken went public their stock was up something like 50% on the first day and it was major news.

Oh come on. Just because Paul wrote something does not suddenly make it fact.

The word 'startup' is at least a few hundreds years old, most likely from the word 'upstart' - the action of starting up.

Startup as defined in the Merriam Webster dictionary: A fledgling business enterprise.

Startup as defined in the Oxford dictionary: A newly established business.

We're talking about startups in the Silicon Valley Business vernacular, which has some strange definitions for common words. (See: Disrupt)

We're talking about startups in the Silicon Valley Business vernacular,

Are we? I'm not in Silicon Valley, and what happens there is of little consequence to me. I, for one, only care what startup means in my vernacular.

For what it's worth, I consider a "startup" any business that's intended to grow into a very large business, where the definition of "very large" is somewhat fuzzy. But I don't think you have to have intent to achieve that in any certain period of time, in order to qualify as a startup.

I dare say that your vernacular is not locked to the definitions of words from several centuries ago.

(Not the OP) I've read PG's article, and it makes sense, but it narrowly fits YC's model and leaves out lean, bootstrapped companies. For that reason, I prefer Steve Blank's definition: "An organization in search of a repeatable, scalable business model". There's a good discussion here: http://www.quora.com/What-is-the-definition-of-a-startup

That sounds more like the definition of a franchise business. Which may or may not be a startup as well, depending on how you go after growth

You're far too concerned with a (buzz)word that loosely fits many, many businesses and definitions and isn't as exclusive or elite or prestigious as you may feel.

PG isn't the only author on the topic, nor is he the most tenured. He presents one point of view from someone with interest in seeing his viewpoint prevail.

I'd like to second this, and provide a helpful link.


But you are not a startup.

... in the opinion of greghinch.

Sorry, but I'm of the opinion that your opinion, or at least your use of terminology, is a bit dodgy. I agree that taking VC money implies certain expectations that may not be what you - as a founder - want or are comfortable with, yes. That's just a warning against taking VC money, unless you know for sure what you're getting into. But to suggest that you aren't a "startup" unless you take VC money and do the "get big fast" thing is, IMO, totally unsupported.

Just because a company is bootstrapping does not mean they are "building a small business" or that you are meant to be companions with the "local plumbers, restaurants and barbers". Big companies can be built slowly. Did Wal-mart start off as a huge mega-corp? McDonals? IBM? A million other examples? No.

Organic growth, re-investing in the company and growing slowly but steadily can be a path to being huge just as well as grabbing a pile of VC money and trying to compress it all into a couple of years. It's all about the decisions you make and how you execute and what your vision is.

Also note that it's really not a fixed decision anyway... you could bootstrap for 6 years, then - one day - decide to take VC or private equity money to expand. So were you, or were you not a startup? Or would that be a "Schrödinger startup"?

"Startups are about growth."

Indeed... in his essay, "Startup = Growth", PG wrote:

"A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.

If you want to start one it's important to understand that. Startups are so hard that you can't be pointed off to the side and hope to succeed. You have to know that growth is what you're after. The good news is, if you get growth, everything else tends to fall into place. Which means you can use growth like a compass to make almost every decision you face." [1]

[1] http://www.paulgraham.com/growth.html

There isn't consensus on what the vague term "startup" means. Here's a different definition, from Steve Blank:

  > "A startup is an organization formed to search for a 
  > repeatable and scalable business model." [1]
[1] http://steveblank.com/2010/01/25/whats-a-startup-first-princ...

This is still a growth focused definition: "repeatable and scalable" is really saying "growable".

Here's an article with examples from popular media:

  > Steve Jobs often speaks of Apple's "startup" culture. 
  > ... an article in the New York Times referred to 
  > the seven-year-old airline Virgin America 
  > as a startup. [2]
[2] http://readwrite.com/2010/07/12/how-do-you-define-startup

no it's not, it's growable+cloneable.

Startups are not defined by their growth. However, VC-backed startups are customarily focused on growth. The difference between these two statements is subtle but important.

'Revenue first, growth second', a paraphrasing of Clayten Christiansen.

VC's essentially use founders like race horses. They pump in the steroids, exercise them to the point of optimal performance or death, and then put them out to pasture if they don't perform. Founders are part of a portfolio plain and simple. They are part of a stable. The VC's are benevolent trainers but they have one goal: ROI. Their benevolence is in direct correlation to their ROI, which is largely determined by growth. The irony is that Wall Street operates in exactly the same way. The difference is that the relationship between Bank and Borrower or Shareholder and Company is more clearly defined than the relationship between VC and Founder.

There isn't anything wrong with VC's. They play a vital role in the financial community. Yet, at the end of the day, a VC is going to look at a startup as a financial product. VC's are offering their partners a product just like a startup is seeking to offer the market a product. The fortunate part about the rest of the business world, cut-throat though it may be to some, is that no one expects anyone else to be benevolent. They expect people to conduct business.

The better the VC-Startup relationship is defined, the better it will be for the long-term health of founders. On the other hand, VC's have no incentive to change course because their is still a willing market of young people who want to strike it rich. In some sense, it would be far better for the market and founders if data was more readily available. In fact, it is a jilted environment. It is always in the VC's favor because they hold the money. However, it doesn't mean that they hold future value. If it did, they wouldn't need to go fund startups.

The current VC-Founder relationship is imbalanced compared to other portions of the marketplace. The VC's hold additional chips because of the allure of a successful exit, the siren of Silicon Valley.

Startups are not about growth. People have to stop thinking that way. Startups are about an idea that's new and not tried before. That's why you can have a medical startup raise $10 million and produce NO GROWTH for 5 years while they work in the laboratory solving a problem and creating a business that didn't exist before. (shameless plug I wrote about this last October: http://jmlite.tumblr.com/post/33443330774/startup-idea)

I see your point about growth, but I disagree over the term bootstrap. I interpret bootstrap to be about external investment. Its possible to have a high-growth company (a "startup"), that receives no investment, or receives investment by the founders.

Mailchimp is a fantastic example. Bootstrapped with 9 figure revenues and crazy profits. http://www.quora.com/MailChimp/How-much-revenue-is-MailChimp...

Pinterest CEO, Ben Silbermann share his xeperience https://www.youtube.com/watch?v=1JLc2PYyCa0

You're wrong. A bootstrapped company can grow just as fast as a company that takes VC money.

Yet every bootstrapped company would grow faster if it took (the right kind of) VC money.

(For the record... I'm happily bootstrapping my startup which is a startup as far as I'm concerned. I'd call startups that rely on VC funding "VC startups.")

I know a couple of 3 person startups where one person was pretty much full-time dealing with the funding side. When you're small that's a huge cut away from people focusing on delivering product.

Both went under and said in retrospect the extra person would have been better applied building the product/marketing.

That is the untrue statement of the decade. In my experience, VC and angels are little more than lucky, but deluded to believe otherwise. Or corrupt, and using you to hide their activities.

Many VC's may very well be primarily lucky, but that does not mean that the companies they put their money on are not more often than not in a position to grow faster with their investment. It's just that they are still also at high, and often substantially increased, risk of failing fast. Not least because an investment is often used to execute strategies that substantially increase the burn rate.

By "right kind of" I meant to exclude the ones you're referring to.

In general I'd find it hard to believe having more resources available reduces your growth rate.

Erm, the issue here is that defining the "right" type of VC funding as the type of VC funding that is "right" is a bit of a tautology...

I don't agree with this because I don't think all bootstrapped businesses have to stay small. The advantage bootstrapping gives you is you can use revenue to find product/market fit, at which point you can start scaling. The problem many 'startups' make is they run out of money before getting to that point.

I think the OP was arguing against calling a bootstrapped business a "startup", and on that ground he has a point (at least according to PG's and Wikipedia's definition of a startup).

That is to say, a bootstrapped business can be a startup (if it gets to the point where it focuses on fast growth) but not necessarily (as in the case of businesses with gradual or no growth).

You may have missed mine. I'm saying that aside from investment, startups and bootstrapped have many similarities. Both are focused on growth, it's just that one is smarter about it (generally). Most of the startups the OP is referring to don't have a mission other than to get acquired before they run out of money. My preference would be to call these 'startups' burnouts instead, and reserve the name for the real businesses.

I completely agree with what you are saying about the "burnouts", but I think a bootstrapped business (unlike a startup) it's not necessarily focused on growth.

You could start a bootstrapped business and only grow to the point where is sustainable in the long term, and just provides you with a decent level of income so that you can work on something you like and under conditions that suit you.

I don't know. I guess I've just always viewed bootstrapping as choosing revenue for financing rather than investors. I don't think boostrapping is the same as what some like to call a'lifestyle business.'

My company is bootstrapped, but we're still very focused on growth.

I don't know. I guess I've just always viewed bootstrapping as choosing revenue for financing rather than investors. I don't think boostrapping is the same as what some like to call a'lifestyle business.'


My company is bootstrapped, but we're still very focused on growth.

Same here. We intend to build a billion dollar business, but we are (so far) bootstrapping. That doesn't, however, mean we'll never take outside money, but there's no need to right now. Once we prove the model and get some initial traction, it might make sense to do it just to fund expansion, but that's a decision for another day.

The word "startup" is the least important part of the whole story.

"...“Cut out that pesky client that generates 80% of your revenue, they’re a distraction on the road to executing $OUR_BIG_VISION”..."

"...I can't help but ask, what did you expect?..."

I can't help but ask what the VC was thinking???

Serious question. I know we don't know all of the details, but this seems, on the face of it, a very bad idea. I would assume there must have been much better methods of handling that client than to cut them loose. A new free tier to generate growth maybe??? Or a tier on the high end which would serve to satisfy that client???

I just don't understand why "paying customer" and "high growth" have to be mutually exclusive??? They are not mutually exclusive in any other industry I work with. Not in the restaurant industry... see Chipotle. Not in the shoe industry... at least women's shoes. Not even bike components... SRAM. Even in industries that are notoriously difficult... like porn... growth and paying customers can coexist.

I mean if "$OUR_BIG_VISION" has no room for customers who pay you gobs of money? I don't know what to think of that.

Without knowing more about the OP's business it's hard to say for sure, but I can give some thoughts based on my own experience. I'm going to assume they are a B2B company of some kind based on the limited description. In this capacity, when you are starting out, often you have a very small customer base. You likely know each of your customers individually. And as individuals, they have their own thoughts and opinions about how they want a service like yours to function. If you're not careful, you end up becoming something more akin to a consultant than a vendor. Your service becomes tailored to the specific needs of one or a few customers.

The problem is, when you are going for growth, you can't focus on the needs of one. You have to be able to take a higher level view, and build a product that can do the most for all of your customers. Sometimes that means cutting features, or at the very least making changes. If you had a product which was tailored for one customer, that fact may very well be quite limiting to expand to many more customers. Even if you build something that could do just as much for that early customer, the fact that you had to make those changes may be enough to sour the relationship and end it.

Again it's hard to know what happened in this specific case without details, but I would wager it was something along those lines. It's a decision not to be made lightly, but one you're likely to face as you grow a B2B service.

Ditching a client who generates 80% of revenue - and enough to provide for 2 people - is akin to quitting a good job with no job to go to.

If you have a client like that who is hindering to growth, then a dominating strategy would be to spin-off rather than ditch. You can afford to put 1 or 2 people on that work while you build from what's already been done.

This is out it happened, reading between the lines.

"We can't get feature X,Y, and Z completed which we think will get us X,000 new customers because of Big Client."

"Well, then fire Big Client."


<months pass while new features X, Y, Z are built, Big Client leaves but it's OK b/c X,000 new customers are coming!>

"Hooray! We just released X, Y, and Z"


"Oh no! It turns out the features weren't actually what customers wanted or needed!"


I would call any new business a startup, but call the VC-driven, exponential-growth-seeking model "growth startup".

I think you make a great point, but out of curiosity, what do you suggest are the best avenues for funding a tech business in the more traditional revenue-driven-growth model, if you're not bringing enough seed capital to get off the ground on your own? It seems like what's missing is an accessible happy medium.

There are a couple options, but the traditional small business route was a bank loan. These are obviously harder to get now, but still not impossible.

The right private investor/angel is also a good route. This should essentially be someone who wants to join you in the business, not someone who is looking for a specific return timeline on their investment. That's a big differentiator between a good angel and a VC.

>I think you make a great point, but out of curiosity, what do you suggest are the best avenues for funding a tech business in the more traditional revenue-driven-growth model, if you're not bringing enough seed capital to get off the ground on your own?

Traditionally, you start the business after you have some experience in the field, and either have some skill you can use to drive some revenue, or some capital.

This idea that you start a product business (rather than a business selling your labor directly) right out of school seems like a new one.

It's a relatively new idea, but I don't think things have changed in a bad way in that sense. The sort of people you speak of typically have plenty of experience using the sort of products they develop. Is it a problem to let people try to start business while they're relatively unencumbered and near peak creativity?

>Is it a problem to let people try to start business while they're relatively unencumbered and near peak creativity?

It's not so much 'let' as "pay them lots of money to"

as for the encumbrances, well, we all make choices. Children don't magically appear when you hit 30. Personally, I find it really surprising that people who choose to have children seem to be able to compete with the childfree in top jobs... but it seems they can, so what do I know?

Your description of what defines a startup is myopic and one dimensional. Would you consider a SpaceX competitor to be a startup? They would certainly not be about 5% week over week growth.

I bet the race to reach the "hockey-stick" kills more companies than it helps. In many cases, there is no reason why you can't end up at the same place in 5 years if you let the business growth organically, rather than force-feed it in the beginning in search of that 1-2 year pop. But how many VC's want to see their investment wandering through the wilderness for 2-3 years before things start to "click"?

Nonsense! To start with, "startups are about growth" is Paul Graham's thesis, and it's just one way to define a startup. There are others; see jt2190's comment for a reference to Steve Blank's: "A startup is an organization formed to search for a repeatable and scalable business model." I'm sure there are others.

There was a Silicon Valley decades before Internet/Web 2.0/somolo startups started colonizing San Francisco, and back then, there were startups in other non-Internet industries - heck there still are. There are startups in biotech, medical devices etc, that take several years just to develop a commercially viable product. Those startups don't use metrics like "5% week over week". They are, however, scalable businesses that may eventually justify VC investment.

There are lots of reasons to want to grow a business quickly, but a business doesn't automatically cease to be a startup because you have decided you don't "need to build it up fast", whatever that means.

Bootstrapped businesses can be startups, obviously. The cost of starting almost any business has fallen sharply in the past few years. You don't need VC funding to build a startup, fast or slow, unless you're building a capital intensive business or you can't fund your startup otherwise.

You're right.

Many accelerators have a knack for picking up teams that have demonstrated the ability to build things that generate revenue and traction. The siren song of money, networking and growth is really seductive. The implications you speak of (and I experienced it) aren't always so clear (or too easy for a prospective founder to dismiss).

Not entirely true. Growth can be exponential, but the growing phase might be very long. Meaning that some business need money, grow steadily for several years and then go stratospheric.

In all the debate this comment spawned, I think people need to realize that we need some language to clearly distinguish between big business, small business, and what I'll call "startups" here. I think "entrepreneur" is a good word to cover small business, including that local pub or barbershop. Such businesses have linear growth and a low ceiling. Software startups can have exponential growth and a ceiling orders of magnitude higher. An entrepreneurial small business could be very successful at a million dollars of revenue. An equivalent level of success in startups is a billion dollars.

So "startup" as a subset of "entrepreneur" seems like good language to me. The difference is the opportunity for exponential growth.

I'm always confused why people assume that you need VC's money to grow FAST, especially if your company a B2B (similar to what people assumed about OP's business). Growing fast means getting a lot of new PAYING customers fast and if you priced your product right, that should cover the extra expenses of infrastructure, support and allow you to expand your staff to build more features to bring more customers in. VC's money is good when you don't have a proper monetization strategy (which may or may not be a problem to begin with) and need money to get by for the first while, which doesn't seem to be OP's case.

Bootstrapping is often the first phase of a vc powered company. Facebook was bootstrapped...

Hmmm, very interesting and strong viewpoints. However, wouldn't you say this is what is wrong with the industry now? Investors looking to make a few bucks rather quickly than having patience and seeing something flourish over time? Granted, not all startups, if any, actually quite blossom after a longer period of time, but I think it's a bit unfair to expect such rapid growth or success in such a small time. Nevertheless, I believe founders must be more cautious when it comes to taking money from folks who may have such narrow vision for the future. Due diligence should be happening on both sides of the table, and all entrepreneurs must understand the reality of the industry now compared to 10, 15 years ago where there was much more tolerance for high risk ventures and little bit more patience.

Its kind of annoying that most of the comments in response to this post are basically debating vague jargon

The word means many things to different people. This is an indication that people should start using different words to describe things if they want their audience to interpret them as intended.

I disagree that startups are about growth. The growth is the key for startups in certain web / social networking space - but definitely not in all areas.

I like Steve Blank definition of the startup: "A startup is an organization formed to search for a repeatable and scalable business model". So startups need to have _constant_ progress in their search for repeatable and scalable business model.

For example, if you run a bio-med startup, are you going to grow and sell your drugs out of the door? Nope. Or if your startup is some B2B boring stuff - sometimes you want to work hard to make a couple big customers super happy and work very hard on how to repeat and scale that business model.

Also some local restaurants do become startups - depending if they figured out how to scale their business model.

Your comment is spot on about the types of businesses that VCs are funding - the ones with "explosive" growth potential (with the expectation that it happens quite soon).

I do disagree that startup has to be growth centered. By virtue of software for which the distribution costs are practically 0; most software companies have potential for a significant growth (unless they are targeting a very narrow audience). It seems that the growth would come naturally once you have a product of high quality (with sufficient exposure/marketing). Hence shouldn't the primary focus of startups be on producing a product of high quality?

There are clearly differences, different risks, etc. in different kinds of businesses.

A new concept for a physical retail store is different from "another dry cleaner" vs. a franchise vs. taking over an existing successful business.

A consultancy where you have 20 years experience in the field as a consultant for someone else is totally different from a b2b startup a a field you solidly understand where you have initial clients lined up before you start, vs. a consumer "hits driven" business.

There isn't a universal line between startup and small business; it probably varies with time and with the founders themselves.

Good points, but has any VC in history actually underpinned growth from 100 to 100,000 customers in a month? Users, perhaps, but users are different creatures to customers.

What's the value of that kind of user growth? It very much depends on the quality of the user, and the startup's ability to convert users to customers. The Techcrunch effect might give you rapid user growth, but are these the right kind of users for the business? Maybe. Or maybe not.

But for the short term story, the VCs love 'user growth', and let's not worry too much about the detail, right?

The problem with taking the VC dollar is that you also need to take their metrics and KPIs. I can think of no better KPI in business than average customer lifetime value, but I doubt most VCs could care less about that, as it's a long-term KPI. It is the short-term vanity / hype metrics ('user growth' being a good example) that they're more interested in. They want to be in and out within a relatively short timeframe.

Explosive growth is all well and good, but as ever we're overly focused on user / customer acquisition, and not with retention, which is far more profitable over the long term. A healthy business concentrates on the latter, and not just the former. For VCs, it seems to be the other way around, concerned as they are with exit strategy.

This unfairly generalizes and vilifies early stage investors. There are plenty of proper, professional VC's who are sufficiently patient and not focused on faux success. Remember, a typical VC fund has a life of 7-10 years. That's plenty of time to develop a company properly and focus on the things which build REAL value.

Perhaps the devil is in the details here, but OP implies that he took accelerator/angel money -- that's potentially a very different thing than a professionally managed institutional investment.

You're right, I've gone and confused accelerators with VCs. And no, not all VCs are short-termists.

I agree with you conceptually. Steady stable businesses of any side have no business taking VC money. Maybe they take PE money for capital structure arbitrage purposes.

But I still consider them start-ups. They are entrepreneurs fighting in the marketplace. Not every start-up needs VC money.

Would this apply to companies like Hewlett-Packard or Microsoft that start out bootstrapped and eventually go public?

So if "startup" is off-limits, what should we call (and how will we fund) the mid-growth/mid-risk businesses that are too risky for a sane person to take personal liability (which banks tend to require) but aim for 15-50% growth per year as opposed to 5% per week (which is 12.6x annual growth-- impossible without what would be, excluding extreme resources, degenerate gambling).

We say in this country that getting rich slowly is the virtue and that get-rich-quick is the scam. Yet VC is obsessed with the latter.

I have some ideas on how to finance this currently underexplored (and underfunded) class of businesses: http://michaelochurch.wordpress.com/2013/03/26/gervais-macle... . But I have no power, so don't count on me to fix the problem.

So, it sucks, but it happens, and it won't matter nearly as much in June 2014 as it seems to right now.

Your co-founder will, hopefully, not find out about this through guessing "Is this my company?" on Twitter, but rather in hearing it from you. You may be heartbroken about it, you may cry a bit (totally OK). Then, you will put on your Responsible Adult pants, call your employee into the office, and tell them the situation. You will emphasize that it is in no way their fault. You will tell them the status of your future payments to them (you can make them -- good), and instruct them that they have no job now other than lining up their next gig, and that you are totally at their disposal for making that happen. First among all things you take care of your employees -- they have the worst risk situation of anyone involved.

You will then tell your investors that you're failing and will be proceeding to wind up the business in an orderly fashion. They probably already know this. None of the ones who you care about will hold it against you -- "this is the nature of the business we have chosen." Some of them may likely attempt to invest in your endeavors in the future, if you decide to go down that route.

You will then draw up and execute on a plan to wind down the business in an orderly fashion. Give your customers a window on their apps going dark, if appropriate. Turn off new signups now. Turn off ability to take money now, unless it is absolutely required to continue paying your employees. There likely a small mountain of very boring administrative work here -- your lawyer and accountant can help you through it.

After this is over, you'll probably be very stressed. That is fine and natural. You're in the hottest market ever in terms of hiring right now. If you want a job immediately, you will have many offers for it. "Built a company with real revenues from nothing. Got into an accelerator. Took funding. It didn't work." is enough of a resume to get you an interview at any number of places. If you need introductions, you are probably well-networked enough to get them, but if for some reason you want more drop me an email. Your designer co-founder will have, similarly, no shortage of offers.

Like tptacek says below, this will not meaningfully hurt your chances of creating a business later. You've likely learned plenty through the experience.

It sucks. It will be better, very soon. You don't have to be scared: this is routine and, while it doesn't feel like it, you're actually in very good position, both absolutely and relative to many other people.

Ask yourself: who did you compete with to hire that developer? Are they still short of somebody?

The one time so far in the history of Shadowcat I've had to cut people for no reason other than lack of money, I talked to managers I knew at other companies who might have an interest in the sort of talent that I was about to force onto the market.

Two people finished working for me on a friday and started a new job on the following monday. The reduction in stress and guilt and hence increase in my capacity to focus that resulted from knowing that was the outcome for them repaid the time spent finding them new gigs within a handful of days. Maintaining a positive relationship with those people afterwards - and the attitude of people who saw how I'd handled it - was effectively just gravy.

Or: Handling this sort of situation with honour tends to help turn it into a positive sum game.

I have a similar guilt when we're hiring and I wind up with several great candidates. sometimes I have 2 or 3 people and I wish I could hire them all. I feel like it's a waste if I can't at least create something out of the situation. Especially considering it's hard to find good people and I have friends who are often looking for staff. A few times I've contacted the candidates and asked if they would allow me to put them in touch with another company. I think I've managed to hook up a few people with jobs.

Good to know that we still have some good people in the world who care about one another.

That's really stand-up of you. Respect.

I like this because even the most calculating selfish person can see how building these connections is a long term win. Talk about behavior like that goes a long way in establishing your company as a good actor.


Great advice. I don't have much to add except that I urge you to make it a priority to manage your stress level during this difficult time, and to not make important decisions in a fragile mental state. Try to be a rock for the other team members, and be professional. Lean on your wife for support, and be honest with others about your situation. Bottling all this up inside is counter-productive and makes it worse. There is no shame in your situation - you took a risk and tried to do something really hard.

Having said that, a month to live is still a month to live. Talk about the situation with your team members and advisors and try to figure out whether or not it's salvageable. Perhaps, after making some difficult choices, there's a way that you can still continue. There have been moments in my own startup experience where things seemed really bleak and hopeless, and it seemed time to give up, but in the end we actually got past it. Another friend of mine had a situation where he literally had no money left in the bank and took the company to Vegas on credit card (I don't advise this!), when someone threw him a $200k life preserver at the 11th hour.

I guess the question you really have to ask yourself is whether you still believe in what you're doing. If the answer is no, then I think your involvement with the company has to end, which may or may not be fatal for the startup overall. I feel for you OP - my own startup failed 18 months ago and it's no fun. However, you'll get through it and I hope you decide to try again.

I would add one more thing. Before you do all this, take 2 to 3 days of absolute vacations (no email, no TV, do absolutely nothing) - this might be just a "dip" and you might be able to find a way to make things successful.


I would add, I usually give myself twenty four hours between drafting and submission of any seriously emotionally charged communications.

sometimes you don't need it, but you want to be as calm (hah) as possible.

Damn good, Patrick. This is probably the most powerful advice delivered in the most gentle way. It's inspiring even for people intimidated by the prospect of beginning a startup.

Great, level-headed outline of the key steps in this situation. Clear communication seems to be a common theme among people who handle these situations well.

And one more thing: Don't wait for the 30th day. Do it tomorrow.

Very true.

Talking to your co-founder "sometime this week" and your employee because if you don't fire him you "fucking won't make payroll" for all of two paychecks should really have been the first moves.

But then, this doesn't sound like someone who cares about much else other than deflecting failure onto his investors and co-founder.

No need to be defensive about it if it did not work out, just go talk to your people.

Your startup is going to die, you're going to get a new job (which you'll have no trouble doing), and sometime in the future you'll start another company. Maybe you'll do the next one smarter, since you'll have more experience.


Been there.

It is very hard to say "This too shall pass" during your darkest days, but tptacek is correct on this one. You'll also know who your true friends are once you get out on the other side.

You'll also know who your true friends are once you get out on the other side.

Spot on.

I recognize a lot of this from startups I've been involved in.

At the height of the bubble I co-founded a vanity e-mail business. We wanted it to be a paid service. Our only competitor was a paid service. But when we looked around, we saw ludicrous valuations per user for users that provided little to no revenue. And the VC's saw it too. And everyone were seduced into going for a free service and figure out monetization later. So that's what we did.

Of course the bubble burst, and the lofty valuations disappeared, and we had to hunker down. The business survived, but we fired 45 or so people - the vast majority of the team, and the VC's lost most of their investment.

I have two big takeaways from that experience: Be conscious whether or not you want to gamble. A gamble can be worth it, but you may be much happier building a company that'll stand a reasonable chance of giving you steady returns and pay you a salary than taking a long shot at millions. We started out wanting that reasonable chance, but got seduced into the long shot without really thinking about it.

Secondly: Keep in mind the VC's often have a vastly different risk preference than you. A founder is usually investing all his/her time in a single business, often for years. A VC spreads their investment over a wide range of companies, and spreads risk accordingly. For them, it's not such a big deal if a few of their portfolio companies fail, if they get the occasional massive return, so it may make sense for them to be willing to take risks with your business that are not in your interest.

It's vitally important to think through how much risk you're ok with before going out and getting investment, and to look for money accordingly, as well as consider how much control you're willing to give up depending on how aligned you think your interests are with the profile of any investors you bring in.

Failures makes valuable lessons (and I've had more lessons...).

"This week, I need to speak to the other founder and fire our first employee before he leaves on a planned vacation. He’s a good developer, but I won’t fucking make payroll next week if I don’t clear him and his severance out of the company."

Is it wrong that I feel worse for this employee than for the author? He's looking forward to a (probably well-earned) vacation, and he's about to be forced into a job hunt instead.

This happened to me 6 weeks ago. I'm now happily employed at another (slightly more stable) startup with good work and a better situation.

Trust me, any employee would be happier to be in a stable and improving startup than in one that's going downhill anyway. If they're a dev with startup experience, they'll have no trouble finding a new job and will be better for it.

Don't worry, just be honest and open with them ASAP. The worst thing you can do is keep them in the dark.

That's a tough spot and I've been there, as the employee that's on the fence as the management nail-bites over accounts receivable and wondering if they can make payroll.

I've since learned that you keep your ears to the ground at all times, in ANY company you work for.

You don't sit in your cube with your Dr Beat Headphones on, you listen to office talk. You overhear that phone call from a vendor asking where their overdue payment is. You notice the rise in closed-door meetings between management and the CFO. You make friends with the assistant that cuts the checks. When you've done it long enough, you know where you stand and when it's time to get the hell out before you're caught with your pants down.

This is just no way to live. If you find yourself doing this, you're either needlessly paranoid and worrying yourself into an early grave, or you're justifiably paranoid, and you should reconsider the choices you're making regarding employment.

Obviously we don't all have the option to bail at any time and find other work, but if this is the kind of culture you're seeing as normal, I feel very sorry for you.

Anyone in this position should -- for their own good -- at least attempt to take a longer view and see if they have options that don't involve constantly sleuthing to narrow down your job's expiration date. Unless you actually like living like this... in which case, hey, it takes all kinds. ;)

No, it's situational awareness. "Is this company doing well? Or is it not?"

That's a very reasonable and business-minded way to approach your employment. You have a very direct interest in the company's success: your paycheck, reputation, friends, etc. Being aware if the company is exploding is simple sanity.

Sustained "situational awareness" and paranoia aren't all that different.

That's the term I was looking for! Thanks.

I think to add to OP's point. This is a smart move for any company whether large or small. Large one's do layoffs as well as small ones. You probably should be more aware when you join a startup that has a burn vs generates cash but the symptoms discussed here are the same ones that Cisco goes through prior to a big layoff as well as a 10 person startup.

I'm not advocating sneaking around and spying on your co-workers. I'm not suggesting paranoia.

What I'm saying is that it's not a bad idea to understand the health of your employer (commercially, competitively, and financially) and recognize when that health changes for better or worse. If I get up and ask 10 co-workers who our biggest competitors are, I can guarantee 5 of them couldn't answer that question. If I asked the winning 5 which ones were growing and could possibly eat our lunch, 4 of them would fail that test.

Have you ever been let go from a job after being told for months/years that everything was fine and the company was doing great? I have. Luckily, at the time, I had no substantial obligations such as raising a family. Now I do.

I learned from that point on to never be blindsided again. And it's worked well for me so far. And I'm not a paranoid person at all. I sleep pretty well, actually.

You should. I feel fucking shitty about this.

Then make plans to do this shitty job in as kind and professional manner as possible.

That means NOT stringing people along. Sit down and figure out whether you're going to be able to keep people employed at 100% of their current pay and benefits. If you know you can't, then the biggest favor you can do for them is to lay them off quickly so they can start looking for a new job immediately.

If you can make some calls to get them leads at other places that's great, but the most helpful thing you can do for them is to let them go as soon as you know that they have no future at your company.

I've done firing and layoffs and I know it's hard. Delaying it makes it all much worse, for you and the departing employees.

Can't you wait till he gets back so he can have a good vacation?...Although I've seen the whole "got fired upon returning from vacation" thing happen a few times. That sucks too! Sorry for both of you.

Apparently you missed the part about not meeting payroll. There are few things worse( legally, in employment law )than missing payroll.

I've alerted firms that missed payroll of the law violation via a couriered legal notice from a labor lawyer. I got my money when nobody else did.

Ugh. I remember what it was like the first time the 2000-era dotcom I was at missed payroll. A co-worker and I had taken the day off to take our kids to the state fair, and found our money wasn't where we thought it would be. They announced the payroll shortfall the day it happened, in company email we didn't read because we were off that day.

Kinda sucked.

Its why I don't get the idea that being an employee is a 'safe' option. Your only as safe as the company you are working for. And frankly you look better as failed founder, then a developer at a failed start up.

> I’m scared.

Congratulations: You're normal. Look at it this way: You are commanding on a battlefield, there are a helluva lot of guys about to die. If you freeze up, they all die.

So make some fucking decisions, save as many as you can. Throw some into the line of fire for the sake of the others. It's what battlefield commanders do. The gods have chosen you for this role, rise up and do your best. You will make some bad calls, and don't sweat it. Focus on making the right calls, then course correcting the bad ones.

Good luck.

I think commanding on the Battlefield is the wrong metaphor, we use it a lot but its not a battle, its a sport. When you tell your developer you can't afford to pay him any more it isn't that he (or she) "dies" its that they move on to their next job. Is it painful? Of course. But it isn't death.

Sports analogies work better since there is always next season with some of the same and some different players. You decide to go for the touchdown for the win instead of the field goal to tie on 4th down. Its a choice, it works or it doesn't, you go on to the Superbowl or your don't. The decisions tomorrow will be affected by today but you will still have decisions to make.

Start-ups (and I think this is one, and I think pizza stores are start-ups too) are sprouts of a business. Sometimes they grow into bushes, sometimes trees, sometimes they can't develop enough to stay alive and they die after a while. But a start-up "dying" isn't people dying. Its people going on to do something else. For non-founders their work day may proceed pretty much unchanged other than office environment and neighbors in a new job somewhere else. As for founders? Well it demands reflection and inspection to glean the maximum amount of understanding about what worked and what didn't. Sadly its the only way to learn some of those lessons.

> Is it painful? Of course. But it isn't death.

No, but firing somebody who is the head of household and has major medical issues at home, is a helluva lot more serious than 4th down.

Absolutely it's serious. But if we're talking laying someone off because you can't make payroll, that is quite different than dismissing them for cause. Generally the latter is what I think of as 'firing'.

There are scenarios one can construct that are quite painful, the person you convinced to move out of their home town away from an ok job and family to work for you who, due to the high cost of living, had a really long commute and got into a vehicle accident their first week, because they had been putting in 80 hour weeks to come up to speed quickly, that put them into the hospital but they they hadn't worked long enough to qualify for California Disability Insurance. Can we make it any worse? Perhaps their girlfriend found out she was expecting that week and so that was why this poor guy was rushing home? And your startup goes out of business because the lead investor pulled out just before the round closes, so now they don't have a job.

I'm sure we could pile more on.

My point is that the common case, the general case, is that people have multiple jobs throughout their lives. Sometimes it is wonderful, sometimes it sucks, but when they are 60 looking back at their 20's it will be part of a much larger tapestry of experience. If for the majority of people it isn't the end of their world.

The head of household with major medical issues shouldn't be working at a tiny barely-funded startup.

It sounds like you waited a little too long before trying to arrange a soft landing, so now you're probably going to have a hard landing.

In this situation, I would tell your investors immediately that their investment is going to zero if you can't manage to sell the company for the value of the team - and that in order to even try to sell the company for the value of the team you're going to need a bridge loan, because otherwise the team is going to evaporate.

If you can get a month's worth of bridge, get all your investors to start looking for a home for the team and concentrate solely on that. If you can't, tell the employees to start job hunting and use the small amount of money you've got left to wind things down gracefully and sanely. Winding things down on your own without the help of a lawyer is a pain in the ass, and lawyers cost money.

If you can't make payroll, stop staring at the ceiling in your bedroom and feeling so alone, while you plan how to fire your expensive first hire.

Hold a company meeting, put the accounts up on the wall, explain that you have almost no money left and the company is about to go broke. Be willing to consider ideas, but don't string people along so you can postpone pulling the plug on them. It's possible that your employees (individually or collectively) will come up with solutions that you can't; your lack of transparency about the firm's health may be part of your problem.

That. Since you have pretty much accepted that you failed as the "leader" of your crew, why pretend you are one now?

Have a meeting with the guys that do work for your company/product first, LISTEN to them, and then take it from there.

What I see of this, is similar to my experience in be part of the "startup"-machine business. I won a award in my country (for my business idea), and participate in several contest where I land in the finalist.

What tremendous waste of time.

Triying to chase the "investor money" was the most damaging thing I do. I waste months on that. Building investor plans, do meetings, and work on CANVAS and other methodologies where some company, that get the real $$$ to "create startups", guided each of us to the path of silicon valley..yes, rigthhh....

At the end, I understand that we was part of a masterplan, where the money was on the big players sucking from the gov funds on build startups, with pre-pakaked advice and zero of the real value that we need.

I think that YCombinator is the only that truly make sense, and the rest copy-cats are more a waste of time than not (even with good intentions).

Thanks for sharing. I sympathize with you, because I just recently went through something similar, with less success than you've had. It sounds like a tough situation, but you're not out of options. You might just be out of the preferred options.

It seems to me that if you're truly out of money, you can either:

1) Try to double down on funding. Your investors can either re-up you or kiss the money they've put in and the debt/equity they have goodbye. But this just puts you on the treadmill for another X months. If you don't like how that feels now, maybe it's not the best direction. 2) Try to get acquired by someone who will pay you to finish your product. 3) Get outside work to pay the bills and put your startup into side project status. Surely with what you've built, you have made yourself highly employable, and if you're in a big-time accelerator, you probably know people who need your skills. 4) Make a "personal pivot", and use the skills and experience you've developed to springboard into something else.

I've come to learn that the discourse in the startup world is completely slanted toward success stories, even though success is far from the most common outcome. Almost no one gets it right the first time.

For example, from my own limping startup, I've learned a lot about what I did that didn't set myself up for success, and how I would do it differently. I got a day job--which I'm loving so far--and I'm planning to save a substantial portion of my pay to build a warchest over the next few years, such that next time, I won't dive in already broke (just one of several crucial things I would do differently).

Interesting. I feel like the time most previously successful startups begin to fail is when the founders are intellectually dishonest and push forward through cognitive dissonance. You have to see and believe in a vision to make it come to life. That is my big takeaway from this - if you disagree with your VCs or don't think something will work, you have to say so.

This may be a shot in the dark, but if it were me I would call up the VCs and begin having the hard conversations. "Hey, we're in trouble. I think we made mistakes here, here and here. I'm in over my head, what do we do now?"

They may ask for what's left of the money back, your business may fail, but at least you go out having been straight-forward with yourself. And you can get on the horse and do it again.

Just my two cents.

> "The day we set foot into the doors of the accelerator, we had a business that DHH would be proud of"

DHH is well known for being against investors in general. Why would he be proud ?

My point of view on this : investors are OK while the funder(s) have more than 51% share, and therefore still making the decisions. You kind of sell your thing to satan here brother, you shouldn't have. You are not in charge of what you put so much work building, from scratch. People with money come here and change your view on the business, on your values ?

Also, I feel you don't talk enough to your co-funder(s). You should not have secrets, work-wise of course.

A bit of advice, if I may : at my startup (in which I'm associate, not funder), we make a scrum retrospective meeting every now and then (2-3 weeks). In these meetings every member of the team explains : 1/ what we should do more 2/ what we should do less 3/ what we should do the same (SAME !) 4/ what they have found frustrating 5/ what they are happy about 6/ any questions I feel this is really important so that every one is happy. It takes courage to explain all this in front of people, but it builds up the team...

Anyway, good luck brother.

I think you misread his paragraph. He was proud of the business the day in its state that day he walked into the accelerator (and presumably for some time before), not BECAUSE he walked into the accelerator.

This is a fantastic headline and a good writeup, but ... why?

Perhaps it's cheaper than a psychologist, but in the process of being "stretched so thin" why are you spending time and effort into something that won't materially help you.

Dude, you have 30 days left. Don't be one of those football teams that gives up with :30 left on the clock. If you're going to lose anyway, throw the ball into the fucking end zone and try your hardest until the game's officially over.

Use your name. Tell us and the world about your company. Ask for ideas and help. Take advantage of this medium to try and turn it around with a Hail Mary pass instead of quitting early. There may be plenty of time for psychoanalysis in August, so what have you got to lose?

There are already 148 people on HN who care enough to comment. And thousands of readers, all of whom are tech savvy and perhaps more. You just never know.

Even if it fails, you'll go down a fighter instead of an anonymous blogger bemoaning his bad fortune. Which would you rather be?

Good luck,


Do you have any HAPPY customers? Talk to them. DAILY.

Why are they happy with you? ASK them and then shut up and write down why.

Take a step back. What do you need to achieve break even NOW and next month? Who do you need to let go? Who do you need to keep?

The grass is always greener on the other side.

I too am running a startup with a downward trajectory. We have more like 6-12 months of runway left but things aren't looking good.

Our path tracks your alternate reality.

I started a project several years ago that took off. It wasn't meant to be a business at the beginning but once it started getting traction I slowly devoted more and more time to it.

It was "profitable" from the first day; the Adsense ads more than made up for the costs of hosting it and the initial design work. I programmed it myself so there was no development cost.

From the beginning it snowballed. It had a thousand users the first week, ten thousand the first month, and 50k users 3 months in. It was at that point that my amateur coding got in the way and the server crashed and burned.

By this time the business was making about $300/day in advertising. The costs were basically zero (a single virtual server + me part-time while I was still in school).

In retrospect this is the point I wish I had dropped out of school, raised some funding, and started building a development team. But I didn't; I read up all I could on scaling and hacked together some more code. That helped the project grow to a million users by the end of the first year.

By this time I had added in for-pay features to the free product to augment advertising and was making well over $1000 per day. I started plugging some of this into advertising to accelerate the growth but most of it was being distributed to me as the only shareholder. Things were going peachy until the servers crashed again.

Again, I read up on scaling, bought a couple hours of consulting time, and patched things up. Within a few months the advertising spend had paid off and at the peak the project was raking in $20,000/day (most funneling straight back to me since at this point it was just me [still part-time] and a couple of part-time customer service reps). This was where the project hit its peak of about 1 million monthly actives.

And, of course, the servers tanked again. This time by the time I was able to get things stable again the market was not as good and we weren't ever able to get back our exponential growth.

I wish I had at the very least "gone for it" and plugged the profits back into the business to hire people to help me. It was about this time that my competitors were discovering the same things I had been experiencing (easy viral growth, cheap user acquisition) and raised about 100 million in VC funding to buy up and saturate the market.

Long story short, we stagnated and slowly declined (no longer able to compete effectively with our newly extremely well-funded competition). Our competitor who raised 100MM in VC is now a public company with several billion in market cap, and there are several others who took a similar path that are worth in the range of a billion as well.

By the time I decided to hire and build a team it was too late to make much of a difference.

I made a couple million bucks and had a fun ride but I'm still kicking myself for not seizing the opportunity to go all-in while the window was open.

We're now playing catch-up but the market is more fully developed now and it's harder for underdog players to get an upper hand.

> By this time I had added in for-pay features to the free product to augment advertising and was making well over $1000 per day. I started plugging some of this into advertising to accelerate the growth but most of it was being distributed to me as the only shareholder. Things were going peachy until the servers crashed again.

What was stopping you from hiring a couple full-time devs (and devops) at this point? And going full-time yourself? It didn't sound like you need VC / angel investment at this point. It sounds like you had enough money to self-sustain.

Fear, immaturity, naivety, idealism.

It took me a long time to get over the fear of others relying on me to support their family/lifestyle. I think deep down inside I felt like my business was a fad and since I didn't have a clear vision of where it would be in 3-5 years I didn't feel comfortable having others reliant on it for their livelihood.

I started it when I was 19 and since it wasn't on purpose and I couldn't envision myself working on it in 5 years I didn't feel like I could ask that of someone else. I wasn't passionate about the project, it was just the first thing I'd done that had gotten so much traction.

I liked the freedom of being able to travel the world without feeling beholden to others back at home. Since I was only accountable to myself I could work 10 hours a week from anywhere on the globe and there was nobody to tell me to get back to work.

At one point I remember saying "I don't want this to be what I'm remembered for." I still feel that way; I want to solve a big problem with my next company someday (bud I didn't and still don't don't know what that will be yet). But that shouldn't have precluded me from going big on this project. I was rushing things, trivializing what I was currently doing, in search of my next big thing.

I eventually did invest a significant portion back into the company to hire a couple developers, designers, etc. But I should have done this much, much sooner.

That's a very interesting story. Thanks for sharing!

There are so many interesting people on this site...

If you know you're screwed, and you've made a couple of million bucks, why aren't you just closing up the company and going home to have a money party?

That probably sounds quite harsh if it's something you love, but a million bucks is like economic freedom for life, and you can try again with a different idea later where there's less active competition. Sounds to me like you did pretty well for yourself.

We're not screwed per se, just treading water just below break even. We still have a significant paying user-base but our churn is higher than our new user acquisition rate.

We keep trying to fix that but over the past year or two we've had little success.

I like the team and we're working on another project that could potentially re-ignite the company so I haven't given up all hope yet.

I committed a block of money back into the company when I decided to hire a team. We haven't burned through it yet (that's the 6-12 months runway that's left at this point) but once it's up I can't justify putting in any more and wouldn't feel comfortable asking an investor to put money into something that I wouldn't fund myself.

Ah, as long as you know when you're going to get out if it goes sideways I feel a lot better about your sitch :)

Best of luck!

In this day and age, a million bucks is not even close to an economic freedom. @webwright has a good post on what he calls "Fuck you money", the amount you'd need to retire rich. Well worth the read.


Sure it is. You just have to have more reasonable expectations. A million bucks can easily generate 30-50k a year in dividends, and without a mortgage, that is enough to live a comfortable lifestyle. You can't go on permanent vacation, but you can live and work on whatever you want to without needing a job.

200k is a silly number to use in this calculation. Most studies show that "happiness" stops having big returns past something like 70-80k. Could I spend 200k a year? Sure no problem. Do I need to? No way.

While 200K is silly, I don't think 1M is really enough to never have to work again assuming a family.

You would have to purchase a house, it should be in a safe area with a good school district, so that's probably 200K? (I don't know what prices would be far away from the coasts)

So now you have 800K generating dividends for you, plus you have to save every year to be able to cover your kids college tuition since you can't get any need based money due to your nest egg. Even assuming you somehow do that on 50K/year (or your kids get merit scholarships), in 30 years (by the time you are 60) your 50K has the purchasing power of ~25K.

I'm personally not planning on retiring at 30 and never doing any productive work ever again. The point would be, that with 30-50k coming in passively and no mortgage to pay, I could live comfortably and work on whatever I wanted to whenever I wanted to.

As for kids college, I had parents that helped some, and I paid for a significant portion myself (i also paid a significant portion of my wife's). I plan to save for my kids college, but it will be on the order of 1k a year or so. With 18 years of stock returns, it should be a decent amount for them. If it isn't enough for their desired school choice, they will have to pay the rest. That seems more than fair to me, but it won't be a huge sacrifice to put away 1k a year.

Also note, that the above linked article was doing math based on 4.2 mil. I think 1 mil would be enough to consider myself totally free, I'm certain 4.2 would be way more than enough.

Edit: Also, by only taking dividends and not principle, any inflation should also be reflected in the stocks. This means the purchasing power should stay constant assuming competent investment decisions.

1) You don't need to pay your kids college tuition

2) Without a mortgage or debt, even 25k goes a very long way. Add up all of your non-housing bills, it shouldn't come anywhere close to 25k, I just did a sample budget and it still leaves 500 in savings per month.

1) So shoulder your kids with massive debt or hope the educational system has changed enough that college degrees aren't required for everything and things are affordable. Nice.

2) Assuming a low cost of living state, and you live frugally for just yourself, I totally agree. I don't think that anyone would say raising a family on that much is easy in any part of the country. (I'm not saying its impossible, just not easy, probably to the point where you would say screw it and go back to work.)

1) I paid for my own college and know others as well. I also know many people whose parents paid for their college. Guess who earns more out of this admittedly small sample? When you have to shoulder your own education you make many more money-making decisions, so that poetry degree from $200k school doesn't look so hot.

2) It's not that frugal, that's my point, here's the budget I put together, which still has luxuries like cable tv, smart phones, and $250 a month for going out. https://www.budgetsimple.com/budget/DKwEDsxt

Assumptions- You own your house outright, you own a car outright. There are other costs like property taxes and car repairs, but with $500 savings per month, those should be easily covered in a year.

EDIT- It's also worth noting, we're talking about income solely from dividends on $800k. Once your kids are going to college if you want to help them out, you have 800k (plus the $500 in savings per month to help them.)

That article may be worth reading, but it is about retiring "rich", not simply retiring. It assumes a yearly lifestyle cost of $200k per year, which is redonkulously high. You don't need to be "rich" to be economically "free".

Most people can live quite comfortably for far less than $200k/yr when they are debt free and (figuratively) sitting on a giant pile of cash, especially if they aren't tied to living in SV, NYC, etc.

Yeah, that sort of depends on how expensive of a house you want, and whether "retired" really means "zero work and zero income" or just means you have the freedom to work on whatever you want and never need to take a full-time day job again.

If you're the "permanent vacation" type of retired then $200k / year fixed income might be low. Waterfront properties, luxury hotels and first-class plane tickets are expensive. You're at least 1-2 orders of magnitude from private jet money.

If you're the "I paid off my mortgage and cars, set aside my kids' tuition account, and now my only expenses are food, utilities and taxes, and now I have years of runway to build my next project, plus free time to do hobbies, raise my kids, and enjoy life" type, then a 2-4 million payout is probably plenty to qualify for "FU money." That's more than most people make in a lifetime, so if you get it in a lump sum, you're set.

It's all about what standard of living you want.

What's your company web site and what are web sites of competitors?

Created a throwaway account because I'd like to stay anon.

Do you mind sharing a little bit about the market space you were (are) in? Just curious more than anything.

I hope he/she does but based on everything said so far I'm going to speculate it's something in the social media gaming space (i.e. the space Zynga plays in).

There was ridiculous money and growth to be had early on in the Facebook gaming race but I imagine it's extremely hard to get traction now.

Please do - don't need to know your company, but I'm wondering what the heck I've overlooked that would have growth like that :) You make me feel old!

Maybe I missed it, but WHY does your startup have 30 days to live? You ran out of money and have no raise potential? How could your employee and cofounder not know this already?

Founders are all very well aware, employees still in the dark.

No raise potential as metrics are nowhere near where they should be. Solid IP and team that might make for a good acquisition, provided investors will OK it (they've rejected one some time ago)

Do investors know you have 30 days? Company is most valuable with team intact, and hopefully no negative PR. Don't let your company get publicly connected to your post, it could kill a deal. I'm referring to acqui-hire scenario

Pretty sure your employees know. Did you cut the free sodas and company paid lunches?

shouldn't you give employees 30 days notice? or is the plan to just fire them when the money runs out? before they've had time to look for another job...

haha, has this ever happened?

If you give employees 30 day notice, most will look for other jobs and leave. You will then have no hopes in turning the company around.

These are the stories that matter more than the success stories we read every day on HN -- there should be more of these; this is reality -- great write-up :)

If you let us know who you are and what company you're working on steering in the right direction, I'm very certain there are people, like me, that would love to help you in any way.

1. I work for a company that can alleviate any back-office pain you have, setting you up on the proper infrastructure, rather than startup blood-sucking solutions like BackOps, TriNet, and Algentis.

2. I have industry connections to help you find mentors, funding, or guidance of any kind.

3. I don't know you, but I am passionate about you. You're a founder and I believe you have great value to offer the world. With this startup or any other you create in your lifetime.

4. You've drummed up great awareness for you and your product with this post, so why not use it to get feedback on your product, with hopes to continue developing something customers want.

That's all I can say. I wish you the best, and hope you're not too discouraged if things don't work out with your current startup. You have the spark. Keep it alive, and build something of value.

Cheers :)

I've been through all of this, it sucks. But this line sticks with me:

"Honestly think the only thing that keeps my health and my marriage intact is my running."

I gotta start running. That's the one thing I always get wrong.

Good luck. Just remember, this happens all the time. For you, it will be a learning experience. In a year's time, you'll be in a new situation with almost a completely new life, and your experience will be valuable to that next step.

Next time will be a little bit better. You'll be a little more trusting of yourself, with a little less naivete, and you'll create something again. Or you'll help someone else create something. Either way, your life will get better, because you're a capable person who started a company, and you're capable of even more. Do the best you can right now and stay positive. The future will be brighter.

For me it's cycling not running (arthritis runs in my family and one knee is pretty fucked from a football injury).

It's literally the only thing that keeps me going some days I reward sustained effort with a ride and a ride wakes me up, clears out the cobwebs and I get some of my best work done after a ride.

It also helps that I've lost more than a stone (14lbs) in just over a month by switching diet and cycling 200 miles a week :).

I wonder if he meant running literally or figuratively.

> I really love my co-founder. It’s an enduring bromance that will last a lifetime. He’s a talented designer, supportive listener and I trust him entirely. However, he left me alone in the cold. He didn’t mean to do this, he didn’t even realize he did. I became the guy who would “do-it-all”. Biz Dev, check. Product Management, check. Support, check. Accounting, check. PR, check. Ad Copy, check. Development Lead, check. While he took complete ownership over design (and really excelling at it).

Communicate. communicate! Cofounder relationship is like any other and communication matters. a lot. You will get tired, feel low and discouraged. you'll have to share it and let one person know who has an outside chance of understanding it and help you out if possible. your co-founder(s).

Failure is a part of growth. This may be a monumental failure, but this blog is both therapeutic and introspective for the author. Examining failures helps us as we move forward. We get the added benefit of looking in from the outside. Kudos for coming forward with this kind of honesty.

I have complete understanding of your situation, having been in the position of having to let people go from a very small team a couple of times. It's hard and feels awful, but you are doing what you see needs to be done which is great in comparison to not having the willpower to act.

If the developer you need to let go is as good as you say, he won't have a problem finding a new job. You feeling shitty will not help him nor you so continue working to remedy the situation to the best of your ability. That's all you need to do and I think it sounds like you will be able to look back to all of this and be proud of you being able to make hard decisions even in a situation when it's so much easier not to.

Could the OP chime in as to why he is writing and publishing this blog? It appears to be a cautionary tale, but I'm not sure what anyone can learn when all the particulars are removed. Why not just write a retrospective after the next 30 days?

Not a cautionary tale, just a blog to vent my frustrations and record the experience.

I'm not in a position to give "advice" nor do I suggest anyone follows "advice".

If you're a new founder and about to get on the VC train, through the accelerator and out again at light speed, it's good to know that this is one way it can all end up. (Nobody really speaks about it anyhow)

Here are some lessons I'm taking away from this article:

  > ... our initial desire to not raise a seed round was 
  > dismissed and we were thoroughly convinced that we had 
  > to continue on the VC rocket-ship in order to matter to 
  > anyone. My reluctance to do this was met by scoffs and 
  > dismissals from many others in the accelerator cohort...
  >  as well as by the mentors and investors who had offered 
  > their time, network and resources to help us succeed.
Lesson: VCs want founders to take larger risks with their company for the reward of a larger payoff. If the founders don't want to "bet the farm" like this, then they probably shouldn't be seeking out VC money, or at least wait until they're profitable enough to have a lot more negotiating leverage.

  > I didn’t believe the shit I was selling investors. This 
  > was not the company I put my life on the line to build.
Lesson: Founders have to push back on their investors when the investors don't understand the full ramifications of what they're asking the company to do. First-time founders often fail to push back because the investor/advisor line is blurry.

  > When I built this team, I didn’t build it with 
  > generalists and with people who could jump into any 
  > area of the business and get shit done. Instead, I built 
  > it with quality-minded perfectionists who build 
  > beautiful things.
Lesson: The founding team has to build two things: The product and the company that builds the product. Find people who can do both.

For a VC your company is just 1 of 1000 they have invested in and so they are focused more on the numbers game. But for you it could be your life's work. It seems taking VC money early on is a big mistake for serious founders.

What if you just kept everyone, told them the truth that you can't pay them, and kept going? If you still believe in the core underlying thing that was working when you started then maybe you can turn this around.

Well, lesson learned.

> What happens next? Hard to tell without precise context, but: as far as I can tell, your company just needs money (paid customers I guess); you cannot be good at your (too many) jobs? Fine, if your company is B2B there is only 1 job to get done right now: business development, if you cannot do it yourself, let's find the best business dev guy you can in your industry. BTW "biz dev" is the only kind of guy I can sincerely hate and love at the same time; that's how I recognize them.

My 2 cents.

I had a moment just like this. We would be short $20k on payroll and the founders and myself and to come up with the difference. That sucked. Reality really sinks in when you are not in a good place to write those checks but you write them anyways. It was the responsible thing to do. Also, don't be a dick. Inform your employees that they need to keep their options open.

My biggest regret was allowing my VC to convince me to not worry about money...but you live & learn.

Thanks for sharing your story. If you need someone to chat with: http://www.startupsanonymo.us/

That's unfortunate but this is business, most successful people go through this many times.

Best thing to do now is man-up, spend your last dollars taking your guys out for a drink and try and leave it with relationships in tact.

Best of luck on re-entering the workforce and don't lose hope. You may find an opportunity you can get started in your spare hours without all the extra sparkly bits that brought you down this time.

Don't get me wrong but this is the classic example of "following the herd" of current gen startups --- too much focus on pleasing investors, raising money, eventually realizing you've relinquished control == don't feel sense of ownership in the company, straying from the vision or not getting enough traction, founders breaking up and then the ship sinking!

I think the best way to look at this is as a learning experience. You have "scar tissue" now and won't make the same mistakes again.

Since you are an entrepreneur, you will inevitably build another successful startup - except this time you'll make it happen in half the time with twice the wisdom.


Pivoted, pivoted, then pivoted again. The other founders can't stand any more and don't want to "give up" on the latest baby.

At this point, I'm running out of options and have a dev team that I can't afford to pay for much longer.

dont lose hope

talk to your potential customers and competitors , your IP can be complimentary to someone or if your team is good you can get acquihired for sure

this thought popped into mind - don't be a zombie startup http://www.daniellemorrill.com/2013/03/zombie-startups/

I am curious, as to why you didn't listen to your gut, and how old you are?

The tempting lure of a big convertible note and a set of drooling investors saying that we were building "the next big thing".

Did you have the self-awareness at the time to realize that what you were building is something DHH would be proud of, or was that only in retrospect? I'm asking these questions, because I struggle with listening to outside advice vs listening to my gut, and Ive been trying to strike a balance as of late.

This always confuses me: sure, you needn't have gone through VC funding, but how far could you have taken the company without it? What would have the alternative been?

I think the team should understand you and stand-up with you. Accepting a job in startup means be ready for an adventure where things like this could happen. Talk to them and look for a key feature or PIVOT

You can alternatively pick the "indefinitely sustainable" road instead (for instance by mixing bootstrapping with freelancing like I did).

It is much slower but much less stressful too, in my opinion!

wow, hidingmyname, if nothing else, you've inspired one of the most positive and supportive threads I've seen on HN (don't bother checking, I'm still a pseudo-noob).

I can only echo what many others have said in one way or another: be at integrity with yourself, do what you can to support your team and maintain your honour, and I believe that you will look back at this, in 6 months, with some kind of gratitude.

You lived it. :)

I would like to send you an email, can you contact me ? simone at mweb dot biz


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