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I lost $209k of my own money trying to start a business

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Re: I lost $209k of my own money trying to start a business

#131

Post by alexpotato »

I was listening to the Bill Gurley episode of the Tim Ferriss podcast [0] and this post linked up with some interesting points Gurley made about the history of OpenTable.

- Most of the restaurants at the time of OT's launch had no internet

- That meant that OT was helping restaurants order and install broadband

- As Gurley point out, this was historically a terrible idea (you are doing hardware installs as part of a software business for an industry with low margins)

- That being said, the network effects made it worth it to do, as PG always says, "things that don't scale in the early days"

- OT also focused on one city at a time

- There are some other interesting points about easy of adoption as the market penetration approached 90% in a city and the sales people went from active selling to essentially just taking orders.

0 - https://www.youtube.com/watch?v=HSVFZ2Qbv3I

Re: I lost $209k of my own money trying to start a business

#132

Post by jrochkind1 »

ly3xqhl8g9 wrote: post #122
jrochkind1 wrote: post #98

Earlier quoted context omitted.

Software development is much more expensive than people predict, including software developers. Let's say you're paying $200/hour to a software consultancy -- which isn't as much as it sounds, the engineers doing the work will not be making anything close to HN-bragging-level of take-home at that rate, although they'll be doing okay. 120,000 is 600 hours of work at $200/hour billed. So that might be two engineers wor…

Sure. Nevertheless, the "App development" budget for a startup with no users/clients should be $0, otherwise it's not a start-up, but more of a start-middle.

For sure you don't want to spend that kind of money without customers/clients yet. The problem with a software-based startup is... software development is expensive.

Not that contractors will rip you off charging too much for shoddy work -- although that happens, software is expensive even when it doesn't.

If you are paying a consultancy for the software development, you should probably plan on spending six figures in consultancy invoices to even get an MVP -- if you mean an actually working app by "MVP". That's not a lot at all. So... up to you to figure out how to verify your business model before you do that (with an "MVP" that isn't actually a working app yet perhaps), or have a business plan that accommodates it.

Re: I lost $209k of my own money trying to start a business

#133

Post by entropyie »

luckylion wrote: post #76
Aromasin wrote: post #60

Earlier quoted context omitted.

I can't help but agree. Technology is hard to grasp without study. Study takes time, which founders don't have. People with technical expertise are expensive. If you don't have the expertise yourself, you have to hire it. He's got 200k and he's bled 125k of that just to make his MVP. That's utterly insane to me.

App studios are often quoting high prices though. I have no idea about app development, but I regularly hear about quotes for relatively simple apps (i.e. you could do it with Wordpress and a custom theme as a web app) that are 30-50k euros. I don't know if these agencies just make insane profits or if they really make everything super complicated and need three developers working for a month to produce a simple crud…

Non-technical people have no idea what is possible, no idea what they actually need and no understanding of the SDLC.

I've seen people running organizations of less than 5 people that just need a landing page and a gallery, insist that WordPress cannot possibly address their needs and hire custom web development for $$$.

Those agencies deserve the money they get for all the hassle they put up with IMHO.

Re: I lost $209k of my own money trying to start a business

#134

Post by twawaaay »

acdha wrote: post #92
twawaaay wrote: post #35

Earlier quoted context omitted.

I don't think they necessarily need to be technical. But there is a huge advantage to being a person that can just roll up their sleeves and do pretty much anything that needs to be done, whatever it is. It does not have to be technical. It is a mindset of being open to researching stuff, trying to figure things out, accepting and learning from failures and doing 20% to get 80% of benefit. A person with this kind of…

Someone needs to be technical or they’ll get hit by a number of problems which are almost always fatal: consulting companies (especially the large ones) will take them for a ride, burning budget and likely failing to deliver something viable; they are likely to make bad hires because it’s hard to tell people who can’t deliver or, more commonly, who aren’t capable of building what the business needs right now; and the…

Which is to say there are upsides to being expert in the field.

The question is whether every company requires technical people to run the company just because they need an app to sell their services.

One theory is that in future every company will be a technical company -- because merciless competition will favour companies driven by technical, scientific mindset. But I don't think we are there yet.

Re: I lost $209k of my own money trying to start a business

#135

Post by okamiueru »

There are so many obvious pitfalls, and the lessons learned are not particularly good. It should have been summed up as:

> Discuss the core business product and idea with a technical person mostly capable of understanding the details it entails. Understand the market, end product you want to envision, and evaluate if there is a fit for it.

But then again, pick any "startups for dummies" book, and it'll explain exactly that.

A technical person should be able to give pointers on stuff you might be missing, and then knowing if there is a market for it... If you don't know, then, what's the point?

For example, "lesson #1" should be met with ">... What do you mean? Of course it is. Also... what do you mean? Who's the middle man here?".

"Lesson #3": Build an mvp

"Lesson #4": If developing your MVP is 90%-95% development costs, you better know how to do this, or have deep enough pockets to not care.

"Lesson #5". What are you talking about?

"Lesson #6": See lesson 3.

"Lesson #7": See lesson 3, also, talk to potential customers, heck, even before mvp.

"Lesson #8": See lesson 7, i.e. lesson 3.

"Lesson #9": I would argue a founder's job is to establish the business and product to a point where one can evaluate the extent it fits a market that was assumed to exist, then tested to exist, then proved to exist. None of this is necessarily related to sales, or cannot be handled by dedicated sales people.

In any case, kudos for writing a post mortem on this. Most would be too embarrassed by it.

Re: I lost $209k of my own money trying to start a business

#136

Post by swyx »

O__________O wrote: post #126
swyx wrote: post #68

> And finally, I ended up landing my first CFO role at a venture-backed tech marketplace. uh, what? without knowing more, and without insulting the author... this is a surprising outcome given the surface facts

LinkedIn appears to show the as CFO of PartsTech, which appears to have raised 16.5M+ according to Crunchbase. Related links: - https://www.crunchbase.com/organization/partstech-inc - https://www.linkedin.com/in/cj-gustafson-13140948

ah, the linkedin shows a lot more relevant experience in FP&A. i guess thats fine since he never stopped working. still unusual for a startup of that size (16m raised typically would be under 100 people) to have a CFO but, as they say, "you do you"

Re: I lost $209k of my own money trying to start a business

#137

Post by yolo3000 »

TuringNYC wrote: post #89
yolo3000 wrote: post #74

Earlier quoted context omitted.

I've consulted in this sort of role for a startup which hired a dev agency. A few months in, we were behind schedule. I've asked them access to their git repo and built some graphs with the commits and LOC changes of every dev we paid for. It became clear that these devs were working on multiple other assignments and were not really dedicated to us. Without these sort of insights, it's hard to judge if they are hones…

I'll make suggestions to anyone doing this: - For slightly more legal protection, the code should be in YOUR OWN git repo, not the dev agency's repo - If you are giving some upfront $ or milestone payment, you should also contractually now own the code up to that point in time - You should not declare a milestone success (and should not pay) until you can independently compile the app straight from git (front end and…

Oh yes, there's so many things that you should do. This was only to grasp the code they were doing. You need a technical advisor who is on your side and can challenge the dev agency. You also need to strike a balance between giving them some slack and fighting to get a solid solution. We relied on the dev agency until we got the initial 2mln investment, afterwards we hired internal devs who took over. But if we scared them too much we might have compromised the investment.

Re: I lost $209k of my own money trying to start a business

#138

Post by moomoo11 »

TuringNYC wrote: post #28
blagie wrote: post #9

I have a very high level of scepticism towards non-technical founders without deep pockets: 1. There's an agility to being able to change things yourself, at 2am if necessary. That's very important to startups. 2. There's a discipline to not accruing unreasonable technical debt of the type that will sink you two years in that you can't expect from someone who doesn't deeply care. 3. Managing devs generally requires u…

+10 on point 3. Even as a highly technical CTO, it is shocking what outsourced dev agencies will try to do. I've seen dev agencies try to conclude engagements with a "successfully working app" but havent delivered any source code, or when source code is delivered it cannot actually be compiled into the successfully working app. As a technical CTO I can smell this a mile away and work it into SoWs, but I wonder how ma…

It makes me shudder to think people actually hire dev agencies to build their early stage product. Having worked with some in the past in a different life I absolutely despised those people for being both terrible engineers and people (my experience working with big outsourcing companies).

Why hire people who don’t care that much to build something the founders definitely care a lot about?

Are there any examples of this working out or are these the 90% of startups that fail?

Personally I’m very technical and I think the best for me would be a partner who is non technical to help me with marketing and sales (something I have no experience in). Would that sort of duo be the best? I can build whatever mobile web backend AI algo shit. That’s easy for me. For my partner I would prefer they are the same level of competence in their side of things.

Re: I lost $209k of my own money trying to start a business

#139

Post by saos »

blagie wrote: post #9

I have a very high level of scepticism towards non-technical founders without deep pockets: 1. There's an agility to being able to change things yourself, at 2am if necessary. That's very important to startups. 2. There's a discipline to not accruing unreasonable technical debt of the type that will sink you two years in that you can't expect from someone who doesn't deeply care. 3. Managing devs generally requires u…

but but no-code movement

Re: I lost $209k of my own money trying to start a business

#140

Post by luckylion »

adunsulag wrote: post #103
luckylion wrote: post #76

Earlier quoted context omitted.

App studios are often quoting high prices though. I have no idea about app development, but I regularly hear about quotes for relatively simple apps (i.e. you could do it with Wordpress and a custom theme as a web app) that are 30-50k euros. I don't know if these agencies just make insane profits or if they really make everything super complicated and need three developers working for a month to produce a simple crud…

There's always a nuance, and I laugh when people tell me 'this is relatively simple'. It often seems like it can be done with wordpress but if the client is fixed that the app MUST function in a way that wordpress doesn't accommodate... well then the costs go up dramatically to rebuild some form of wordpress but not using wordpress... I often like to present things in terms of costs alternatives to my clients. IF it…

Sure, complicated things can increase costs, but my impression is that a lot of the apps don't need to be "real apps", because they don't do anything mobile specific, they could be a webview + Wordpress because they're delivering content managed in a CMS, and plenty of them don't even work in airplane mode.

A company I work for just bought another company and I was asked to help them on their feet with their website. It's pretty much a standard Wordpress with a custom theme and maybe 300 lines of custom code in plugins. Their agency billed them north of 50k euros. I can tell they got ripped off because there's just nothing there that could conceivably take anywhere near that much work. I have little insight in the app-making process, so I can't tell if everything is just super complicated or app agencies just say "okay, this should be about 50 hours, let's quote 500 hours in case the client changes their mind on some details".

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