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Startups are Financial Suicide

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Re: Startups are Financial Suicide

#21

Post by nicodjimenez »

Everyone over-extrapolates based on personal circumstances.

On one end you have guys like Paul Graham and Peter Thiel that truly believe in the startup way of life.

On the other end, you have people that quit their job at Google, posted a "Why I left Google to do a startup" article on medium, and then ended up regretting the decision years later.

Most people that start companies are either people that are unemployable and can't help themselves, or employable people that could do well in more traditional career paths. If you're in the employable group, I think it's important not to start a company for the sake of doing it because it's cool. The type of startup becomes really important. As an old man, would you regret not trying to solve this particular problem that you're passionate about? It's different for serial entrepreneurs / hustlers, who are always scheming for new ways of making money no matter what.

Re: Startups are Financial Suicide

#22

Post by tristanj »

hartator wrote: post #4

> We raised over $25m and sold millions of dollars of product to real customers. I don’t fully get this part, even if the startup wasn’t financialy viable, why didn’t he pay himseslf something around $10-35k per month as CEO? He won’t have his savings crushed now, and probably made money for himself. Maybe I am missing something obvious.

>Why didn’t he pay himseslf something around $10-35k per month as CEO?

I take you've never planned a startup budget before ;). Try running the numbers on how much it costs to run a startup with 5 employees for 3 years given $2m. You can't afford to pay the CEO $35k/month because you will run out of money far to quickly.

Re: Startups are Financial Suicide

#23

Post by matchagaucho »

For some context, the "startup" in question appears to be an online woman's shoe website.

https://www.crunchbase.com/organization/shoes-of-prey

I would hope this Founder has more to share in retrospective explaining the true reasons for suicide, such as:

  * The margins of an online retail shoe business are poor (typically single digit).

  * The costs of carrying unsold inventory will bury a company in debt.

  * Being the first to deliver a product online is not a sustainable competitive advantage.

  * Amazon is crushing everyone in retail.

Re: Startups are Financial Suicide

#24

Post by tomashertus »

This is meaningless article.

I think this is common sense that when you are starting business, you have to adjust your life style to that. Suddenly, you won't be getting regular hefty paycheck from Google and have to rely on your business income. If the income is not able to sustain your current life style, you have to adjust otherwise you will burn through your cash. That is reasonable in the short term, but should ring a bell if it takes more than 1 year to be able to live from your startup salary.

On the top of that, you have to adjust the company to the "startup" budget as well. I have seen so many people go nuts with hiring, benefits and useless spending after getting large seed or series A.

Re: Startups are Financial Suicide

#25

Post by nicodjimenez »

matchagaucho wrote: post #23

For some context, the "startup" in question appears to be an online woman's shoe website. https://www.crunchbase.com/organization/shoes-of-prey I would hope this Founder has more to share in retrospective explaining the true reasons for suicide, such as: * The margins of an online retail shoe business are poor (typically single digit). * The costs of carrying unsold inventory will bury a company in debt. * Being the…

Very true. Businesses like this feel "greedy" to me, in that they are not particularly inventive or novel, but appealing in the financial sense that the market is big. Greedy companies fail.

Re: Startups are Financial Suicide

#27

Post by keeptrying »

tomashertus wrote: post #24

This is meaningless article. I think this is common sense that when you are starting business, you have to adjust your life style to that. Suddenly, you won't be getting regular hefty paycheck from Google and have to rely on your business income. If the income is not able to sustain your current life style, you have to adjust otherwise you will burn through your cash. That is reasonable in the short term, but should…

Thats like saying weight loss is common sense and theres no need to talk about diabetes.

Also building muscle and weightlifting is common sense and thus theres no need to talk about growing old.

And finding the right spouse is common sense and theres no need to talk about divorce.

Re: Startups are Financial Suicide

#28

Post by ghaff »

nicodjimenez wrote: post #21

Everyone over-extrapolates based on personal circumstances. On one end you have guys like Paul Graham and Peter Thiel that truly believe in the startup way of life. On the other end, you have people that quit their job at Google, posted a "Why I left Google to do a startup" article on medium, and then ended up regretting the decision years later. Most people that start companies are either people that are unemployabl…

Or: at one end you have people who got really lucky and at the other end have people who didn't--and walked away from a fairly sure thing in the process. Grass is greener and all that.

There are definitely people who just wouldn't be happy any other way. And people who are at least seemingly in the right place at the right time to give it a shot.

Re: Startups are Financial Suicide

#30

Post by tomashertus »

keeptrying wrote: post #27
tomashertus wrote: post #24

This is meaningless article. I think this is common sense that when you are starting business, you have to adjust your life style to that. Suddenly, you won't be getting regular hefty paycheck from Google and have to rely on your business income. If the income is not able to sustain your current life style, you have to adjust otherwise you will burn through your cash. That is reasonable in the short term, but should…

Thats like saying weight loss is common sense and theres no need to talk about diabetes. Also building muscle and weightlifting is common sense and thus theres no need to talk about growing old. And finding the right spouse is common sense and theres no need to talk about divorce.

ohh c'mon this is childish argument, we can do better no?

Have you read the article? It does explain why they, after 9 years of hard work, end-up having financial issues. What was the reason for them to not to have financial viable product? Was it cause of over-hiring; over-engineering; wrong market? There are always problems in companies, so what was the unique experience they have that they can confidently put all startups into one bucket and say: "Look this bucket, this is suicide bucket!".

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