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We're Shutting Down and I'm Scared

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Re: We're Shutting Down and I'm Scared

#141

Post by eigenvector »

cperciva wrote: post #111
tptacek wrote: post #93

Earlier quoted context omitted.

Health insurance companies can no longer deny coverage based on credit scores, although apparently credit scores can impact your rates. Like I said: I have a very crappy credit score, and it's had no impact on my life (including the times I've tried to buy private health insurance, which was a nightmare for reasons having nothing to do with credit and everything to do with the fact that the ACA hadn't passed yet). Ot…

keep me out of the market for credit. A good thing Have you never wanted to get a mortgage? For that matter, lots of landlords in Vancouver check credit scores in order to weed out potential bad tenants.

Protip: many landlords in hot property markets like Vancouver are speculators who are using your rent to pay their mortgage. Offer to pay a year's worth of rent up front in return for a discount (I'd ask for 3% - more than you can get from a risk-free investment but less than the landlord's mortgage interest rate).

Obviously this only applies if you have sufficient liquidity that paying $30,000+ upfront isn't going to impact your life in other ways.

Re: We're Shutting Down and I'm Scared

#142

Post by clarky07 »

a8da6b0c91d wrote: post #136
patio11 wrote: post #131

Earlier quoted context omitted.

You're not making the same investment at the outset: you're doubling down after the business has already demonstrated "I'm failing quickly, unlike the median funded startup, which is failing marginally less quickly." [+] In return for assuming that extra risk, you get no marginal gain in equity. If you absolutely must shoot your own foot, clean the wound after doing so, because gangrene sucks even more than gunshots…

I still don't get why it's a bad idea to forgo salary in a venture where you retain majority ownership. It sure seems like there are loads and loads of people who spun up successful businesses on sweat equity. Way more than have ever taken funding. If it's not a capital intensive business and your cost of living is low, why on earth wouldn't you minimize investors to the extent possible? If you've got $300k in saving…

There were a lot of "ifs" in that comment. Unlikely he has 300k in savings, if he did he wouldn't be scared. Also unlikely his cost of living is low if he lives anywhere near the valley and has a wife and/or kids.

If you have tons of money in the bank and have a really low cost of living, and your business isn't capital intensive, sure you can skip a few paychecks. Even then, the small salary you are taking likely isn't meaningfully impacting the startups runway. Maybe extend it just slightly. And as you are doing it you are lowering your own savings and personal "runway".

Re: We're Shutting Down and I'm Scared

#143

Post by cperciva »

eigenvector wrote: post #141
cperciva wrote: post #111

Earlier quoted context omitted.

keep me out of the market for credit. A good thing Have you never wanted to get a mortgage? For that matter, lots of landlords in Vancouver check credit scores in order to weed out potential bad tenants.

Protip: many landlords in hot property markets like Vancouver are speculators who are using your rent to pay their mortgage. Offer to pay a year's worth of rent up front in return for a discount (I'd ask for 3% - more than you can get from a risk-free investment but less than the landlord's mortgage interest rate). Obviously this only applies if you have sufficient liquidity that paying $30,000+ upfront isn't going t…

Alas, the BC Residential Tenancy Act makes it illegal to have a deposit larger than one month's rent. Not that anyone is going to stop you -- but if you pay 12 months of rent in advance, you can legally demand the next day to have 11 of those months of rent returned to you. Unfortunately the law is very clear that you can't sign away your right to only pay one month of deposit -- even if you want to.

Re: We're Shutting Down and I'm Scared

#144

Post by clarky07 »

It's interesting, currently my business (bootstrapped and small) is doing just fine. Profitable, making more than I used to working for someone else, and I'm STILL scared shitless most of the time. The wife and I want to build a house and have kids and that sort of thing, and it all scares me.

The really interesting thing though is that in general working for yourself is not much if any more risky than working for someone else. Sure if you are at Apple or Google it's unlikely they are going out of business, but companies big and small go bankrupt all the time. Layoffs happen all the time. That's the way things work. You just have to make yourself valuable and work hard. Especially in our business, if you are remotely competent it isn't hard to find work right now.

I really should find a way to feel less stressed. Things are mostly fine, and I know for a fact that I could get a job tomorrow if I wanted/needed to. "Failure" for me would likely mean taking a high paying dev job at a great company that I respect. I should just relax and do good work and hope for the best. It's hard though, and I see where the OP is coming from.

Re: We're Shutting Down and I'm Scared

#145

Post by sayemm »

mbesto wrote: post #45

Here's one of the most important lessons I've learned about startup life: There is a fundamental difference between being poor and being broke. Being broke implies you don't have enough cash or expected cash flow to cover your debt - but it doesn't mean you haven't accumulated wealth. Being poor means you neither have cash nor wealth. The OP is simply broke, but not poor. Knowledge from failing a business is (IMHO) o…

"Knowledge from failing a business is (IMHO) one of the greatest, if not the greatest, ways to accumulate intelligence in business. That is extremely valuable."

Amen.

Re: We're Shutting Down and I'm Scared

#146

Post by johnjlocke »

skunkworks wrote: post #127
tptacek wrote: post #99

Earlier quoted context omitted.

The dumbest thing I've ever done in my career was to start a "founders don't take salary" company after earning a windfall from the sale of the last company I'd been at. Most companies fail. That company was no exception. The personal cost was spectacular. Most HN'ers seem to be in their mid-20s. Something you'll learn when you cross 30 is that time is more valuable than money. You'll never get the years you spend ch…

I'm not a huge fan of Rich Dad Poor Dad and the cult of Kiyosaki, but that was the first place I heard about the adage "pay yourself first". I think a lot about that, not just in financial terms, but emotional as well. If you can't take care of yourself, you won't be able to sustain taking care of other things, no matter whether those other things are businesses, employees, personal bills, or loved ones.

That philosophy is also in The Richest Man in Babylon and every single book written on finances ever. If you can't pay yourself first, you will never save anything.

Re: We're Shutting Down and I'm Scared

#147

Post by johnjlocke »

dsr_ wrote: post #48

Reminder for people who are running startups and are in serious relationships: nothing should be a secret from your spouse/partner. Especially money. Maybe they're supporting you so you can recycle every dollar of revenue back into the business. Maybe you're gambling your shared savings on the success of your venture. Maybe you've got a good financial position and your family will be safe no matter what. It doesn't m…

This point cannot be stressed enough. If you hide stuff from your spouse about money, you're going down a real bad road. If your life at home is shaky, there is no way you are going to be able to lift a business successfully. The two cannot be siloed off from one another.

Re: We're Shutting Down and I'm Scared

#148

Post by 001sky »

nostrademons wrote: post #140
tptacek wrote: post #99

Earlier quoted context omitted.

The dumbest thing I've ever done in my career was to start a "founders don't take salary" company after earning a windfall from the sale of the last company I'd been at. Most companies fail. That company was no exception. The personal cost was spectacular. Most HN'ers seem to be in their mid-20s. Something you'll learn when you cross 30 is that time is more valuable than money. You'll never get the years you spend ch…

I'm trying to understand the context and limits of your advice, in light of the chicken-and-egg problem of getting people to invest in or buy your product before proving it out, which usually requires building something to show it's possible, which usually requires quitting your previous employer so they don't own it. Are you suggesting that forgoing salary shouldn't be a substitute for thinking about your revenue mo…

The idea that you should preserve investor's cash is a good notion, but not at the cost of forgoing fair compensation to yourself and the early founding team. In the long run, everyone is better off from this approach.

(1) Good investors run (on average) profitable portfolios, and they are not going to be made or broken by pennies on the dollar from the disposition of the firm's assets in a bakruptcy.

(2) Good founders should have enough 'skin in the game' that the signalling behaviour forgone by avoiding this strategy should not be the make-or-break between succusseful outside investment (or not).

(3) Following up, if (1) and (2) are in place, everyone is best served by having the founding team fully solvent. Preferably before and after the company succeeds or fails. All of the principal founders, investors, and employees want each other to be thinking clearly, rationally, and open-mindedly...with well-understood motives.

Re: We're Shutting Down and I'm Scared

#149

Post by yuhong »

panther2k wrote: post #51

I'm there right now (minus the high-profile accelerator and funded part so I had even less success). It sucks. I'm exhausted. But I'm broke so I need a job. I can hack stuff together but I'm more of a junior level dev so not sure how attractive I am to a Silicon Valley startup. I thought I knew what it took to be successful, so I quit my wall street job and drove out to San Francisco to JFDI. I even lived in my car f…

Probably should have made this a throwaway. Oh well.

I prefer that the problems be fixed properly if possible.

Re: We're Shutting Down and I'm Scared

#150

Post by nostrademons »

001sky wrote: post #148
nostrademons wrote: post #140

Earlier quoted context omitted.

I'm trying to understand the context and limits of your advice, in light of the chicken-and-egg problem of getting people to invest in or buy your product before proving it out, which usually requires building something to show it's possible, which usually requires quitting your previous employer so they don't own it. Are you suggesting that forgoing salary shouldn't be a substitute for thinking about your revenue mo…

The idea that you should preserve investor's cash is a good notion, but not at the cost of forgoing fair compensation to yourself and the early founding team. In the long run, everyone is better off from this approach. (1) Good investors run (on average) profitable portfolios, and they are not going to be made or broken by pennies on the dollar from the disposition of the firm's assets in a bakruptcy. (2) Good founde…

I can easily see paying yourself living expenses, once you've taken investment (or have paying customers), as a good thing. That's basically "ramen profitability", and getting to there as fast as possible is important.

I'm wondering about the part before taking investment - when you don't have any money coming in, are still building out a product (or even a prototype), and have cash in your personal bank but none in the corporate bank. Is it appropriate to pay yourself nothing then? Should you make this phase as short as possible? (Well, obviously yes, but in practice this means a lot of different trade-offs, like picking a less ambitious project that you can complete more quickly, or doing consulting to bootstrap the business, or pivoting to a business that focuses on profit more than userbase, or not doing a startup at all. At what point should you be willing to sacrifice future possible gains to ensure that you have money coming in to cover your living expenses?)

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