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Ask HN: Why did your startup fail and what did you learn?

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Re: Ask HN: Why did your startup fail and what did you learn?

#41

Post by tptacek »

mrhappyunhappy wrote: post #35
subhobroto wrote: post #31

Earlier quoted context omitted.

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that. Has this been your experience as well? ... and do you "outsource" your AR for a % of your invoices?

As a consultant I state that I will charge a 10% late fee for every week a payment is late. I’ve never had a late payment. I’d say offering a discount does the exact opposite.

How big is your average client and how heavily utilized are you? Your experience is very different from mine, but I may be working with larger companies (or you might be working with an idiosyncratic subset --- I don't think I am, though).

Re: Ask HN: Why did your startup fail and what did you learn?

#42

Post by tptacek »

subhobroto wrote: post #36
MisterOctober wrote: post #30

Earlier quoted context omitted.

No doubt about it. An effect of the behavior set I describe above [and I was only describing them -- I've been on both ends of that phone call over the years] is that in these relationships, the established payment terms are kind of irrelevant to the way things actually play out.

You are getting me really curious now. I have tackled this issue (late payers) in two ways: 1. My cashflow from other investments ensure I did not run out of money. This is a bad design where I am effectively extending a 0% APR loan to the client with a term of their choosing 2. When I have ARs large enough to entice "parties that handle payments", I choose to let them handle the invoices on my behalf for a cut. A pr…

I mean, if you're careful about who you work with, 0% isn't really a meaningful risk. Bank of America (or, for that matter, Airbnb) isn't going to default on you; the pain the ass you could generate if they did would cost more than the invoice.

Re: Ask HN: Why did your startup fail and what did you learn?

#43

Post by ellius »

tomasien wrote: post #18

I've had two startups "fail" for unusually clear reasons: Startup #1: too hard to believe it could be big. Widely loved consumer website we tried to fund with angel/VC money, and it was too implausible it could ever be a $1b+ company. We needed a non-VC strategy to fund that business but didn't realize that - ran out of gas. Startup #2: found PMF, business-model fit, high-growth, and had an amazing team. Blown up by…

Could you elaborate on this in some detail?

I'm in the position of believing I have "1 thing right." I worked in an industry (banking) with a serious software problem and one particular vertical that I'm confident I could build a good product for. I was in a position to evaluate all of the major vendors that would be my competitors, and I'm confident that I could get one particular thing very right. Ths problem is that I have pretty much no idea where to go from there. I've never started a company, I didn't even study business in school. In my career so far I've pretty much done two things: I got very good at that particular aspect of banking, and I taught myself to code and now do it professionally. But I'm so aware of the gap between my own knowledge and the skills required to run a business that I wouldn't really feel confident trying to go get investment money (and wouldn't know how to begin even if I thought I could use it responsibly). I guess what I'm trying to get at is: once you have the one thing, where do you go for help with the thousand?

Re: Ask HN: Why did your startup fail and what did you learn?

#44

Post by morcutt »

woogiewonka wrote: post #39

My first startup failed because I had no idea what I was doing. I started an online vacation rental site, similar to vacationrentals.com vrbo, homeaway etc... I was getting traction and had people list their rentals on my site but I failed to collect any revenue. The thought was, build it, offer it for free to grow it and then charge. Well, I built it (wasting way too much money on an original solution when existing…

How long ago was this? Was it a specific region or all over? Did you try to raise funding or it was all bootstrapped?

Re: Ask HN: Why did your startup fail and what did you learn?

#45

Post by keyle »

I took a year doing something I had planned would take 6 months. I was inexperienced, I shipped a product that had a very niche market. I got on the PS4 appstore and the algorithm just took me down, way down. Pricing was also screwed up in 60 odd countries for the first month with no control of mine. RIP.

Re: Ask HN: Why did your startup fail and what did you learn?

#46

Post by subhobroto »

tptacek wrote: post #42
subhobroto wrote: post #36

Earlier quoted context omitted.

You are getting me really curious now. I have tackled this issue (late payers) in two ways: 1. My cashflow from other investments ensure I did not run out of money. This is a bad design where I am effectively extending a 0% APR loan to the client with a term of their choosing 2. When I have ARs large enough to entice "parties that handle payments", I choose to let them handle the invoices on my behalf for a cut. A pr…

I mean, if you're careful about who you work with, 0% isn't really a meaningful risk. Bank of America (or, for that matter, Airbnb) isn't going to default on you; the pain the ass you could generate if they did would cost more than the invoice.

Agreed with a caveat. Having actually worked with BofA, the amount of overhead for a contract could have put me out of business if I was not a BIG5 employee.

The big boys are not even going to consider me unless I am a safe choice (they really don't care if I am a kickass programmer who can solve their problems - they want to do business only if I am a known quantity so that they don't get fired if a deal with me go sideways).

I am really lucky to have positive cashflow because I can be picky about clients but a lot of friends ask me how to get started and my experience with cashflow is that a fantastic business with client set A can absolutely fail compared to the exact same business with client set B just because of cashflow issues.

Maybe I am too old and jaded but now I always ask people to include and test for cashflow in addition to the efficacy of their business ideas vis. market fit.

Honestly though, this becomes too demanding of entrepreneurs who are already overworked with lead gen, product design and development as is.

You should definitely write a few articles about cashflow. People don't write about it enough.

Re: Ask HN: Why did your startup fail and what did you learn?

#48

Post by kenneth »

tptacek wrote: post #17
MisterOctober wrote: post #9

Earlier quoted context omitted.

^ this is real talk. Big companies love to be behind on AP for a variety of reasons, among them: - Their own 'highly matrixed' organizational structure makes it near impossible to find 'the correct person' to talk to about accounting issues, let alone get a straight answer out of them - so chasing these issues down becomes a huge drag on your time and energy and you may very well just give up after a while - Past-due…

A lot of this is probably true, but it's really to your benefit to understand, as a businessperson, that this is generally how large clients expect to conduct business. You can fight it and even establish better payment terms, but it isn't always worth it. It's usually cheaper just to build a business that is resilient to late payments. Over the last 15 years or so, a lot of my best customers have been super-late pay…

You can get credit specifically to solve for that issue, usually at reasonable rates. Short-term small business loan facilities exist. Another decent option if you're reasonably sure you'll receive payment NET30 are credit cards + an online bill-pay service like Plastiq.

Re: Ask HN: Why did your startup fail and what did you learn?

#49

Post by jamesleonard »

- Co-founders didn't have enough domain expertise - Poor execution on our mission which allowed peoples personal side interests to pull tech and development in every which way - Many other reasons

What did I learn: Strong leadership = Strong execution If you can't communicate you can't create.

Re: Ask HN: Why did your startup fail and what did you learn?

#50

Post by kenneth »

subhobroto wrote: post #36
MisterOctober wrote: post #30

Earlier quoted context omitted.

No doubt about it. An effect of the behavior set I describe above [and I was only describing them -- I've been on both ends of that phone call over the years] is that in these relationships, the established payment terms are kind of irrelevant to the way things actually play out.

You are getting me really curious now. I have tackled this issue (late payers) in two ways: 1. My cashflow from other investments ensure I did not run out of money. This is a bad design where I am effectively extending a 0% APR loan to the client with a term of their choosing 2. When I have ARs large enough to entice "parties that handle payments", I choose to let them handle the invoices on my behalf for a cut. A pr…

You can always ask for a retainer, too.
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