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Comment by tptacek | Hacker News Reader

If you're technical and you think you've got enough hustle to start a company, you can run at an arbitrary standard of living for a long time as a 1099 contractor.

I'm past arguing that YC isn't worth it because the money is too small and getting funded is a bad trajectory[1]; the program has clearly been a huge win for a lot of people. But you can execute the 37signals playbook after attending YC. Just go, launch, and then consult.

If you have a 3-person team with a strong dev that has a short runway, that dev should have no trouble picking up 1-2 month projects to keep himself going with the company. It is so straightforward to do this, the money is so good, and the commitments are so flexible that I'm led to question the "you should make as little as possible" advice.

Why burn your family out? There's no points for effort, only for execution.

I'm 34, for what it's worth.

[1] I still believe both those things, though.

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Without turning this into "37signals vs. Y Combinator", let's just say there are pros and cons to each approach.

One of the cons of contracting is can be really hard to divide your attention in a startup. If there is any possible way you can devote 100% of your attention to a startup, then by all means, do it. I'm 10x more productive when I put 100% of my time into a startup instead of 50%. 10x, not 2x. Just my experience.

On the other hand, contracting is a great backup plan. It kept Zencoder alive in the early days, and we still do some video-related consulting work to reduce our burn and compliment our encoding service.

There's no points for effort, only for execution.

Well said. Mind if I use that? :)

Contracting is very distracting. But it's distracting in a different way than a full-time job. And I think it's game-changing for lean startups in a way that may moot some of the concern about concentration.

First, contracting requires hustle just like moving a product does. It's an investment decision (of time, rather than money) in a way that a 9-5 job can't be. It involves company building and has knock-on effects (recruiting, applications for IP) that can help the product business. And it is flexible.

And this whole notion that you need unbreakable concentration to start a company seems like an extension of the idea that there's a runway, launch, and hockey-stick curve to all product businesses. But those things that yo' liable to read in de blog posts, they ain't necessarily so. Particularly if you have a functioning consulting engine.

I'm less familiar with direct-to-consumer products than most people on HN are; I sell to businesses. The overlap between selling services to companies and selling products to companies is significant. Maybe you should consider something businesses want, so you have options besides getting shot out of the VC cannon.

I do B2C stuff like many here. If you are planning on using SEO or AdWords as channels, there will be long stretches where your ability to improve is rate-limited by Google loving, and you can literally acquire that while deceased. (Don't die! But understand that whatever you are spinning your wheels on isn't improving rankings if it isn't winning links.)

Contracting "on the side" can give your startup(s) an effectively infinite runway. Hard to beat that.

What do you mean about consulting being good for recruiting? Surely you don't poach employees from your clients?

Of course we don't. Being able to pay people is very good for recruiting, is my point.

Any advice on filling a contracting pipeline with clients while trying to make the most of your early core work too?

Not really, because I haven't mastered that. But if you're trying to build a startup in the (say) server monitoring space, a great bootstrapping approach would be to do a bunch of server monitoring contracts and keep the IP (which isn't too hard if you say you're using "prior inventions").

Any advice on how to go about getting contracts for, say, server monitoring space?

Recent events in my personal life have led me to believe you can get "dumb money" with reasonable terms in NYC. So if you just need the dough, it's no problem these days... any idea and founders with a pulse will do. Get in on it while it lasts...

The biggest problem with getting money isn't getting the money; it's what strings are attached to the money.

People think this is an abstraction. My VC-funded company hired a CEO (who I like) who decided our A-round-funded company was optimally positioned to go head-to-head with Akamai. I saw a board at another company wage a guerilla war against its management team. The threat here is not abstract.

Angel funding, on the other hand, generally comes without strings. If you take $1M of convertible debt, you don't have to give up a board seat, special rights, etc. If you do it right, you get some runway and some awesome advisors. That's it.

Pros and cons, of course, but VC funding (especially when the VC gets to set the terms) is a world apart from angel funding.

Isn't that no-strings angel funding predicated on the idea that there's going to be either a round of financing or an exit?

I have no problems with angel funding (I'm really not all that familiar with it; no company I've been involved with has taken "angel money"), but I do have concerns about any company model that puts first-time founders on a burn-rate runway. There are less perilous ways to build a business.

Isn't that no-strings angel funding predicated on the idea that there's going to be either a round of financing or an exit?

Really depends on the investor. Some angels explicitly want you to go Series A -> Series B -> $100M -> IPO. Others explicitly want to help founders start cool companies. Some are basically mini-VCs, and others are really founder-friendly. So it's just important for a startup to have the right angels, whichever direction you go.

That is why I added in "reasonable terms." The terms I've in deals lately seen have been very favorable for the founders. Not as loose as an angel round but much better than I've seen for similar deals in the past. As John Dahl hints, a lot of the deals are convertible debt deals.

I only mention this because from my immediate perspective it seems easier to raise $100-$500K in NYC than it does to raise $10K from Y Combinator. Which is the better deal? I couldn't tell you.

If you put 100% into your startup you'll get 100% out. If you're constantly chasing the dollars/pounds/euros/crores then your startup is under constant pressure to become a side project.

What things like YC do is give you the opportunity to make the idea your full time job with full attention. The money isn't necessarily great but the network is. The alternative is that you raise the money elsewhere and do without the network. If the benefits of that network outweigh the potential later costs of Ycombinator, I'd say do YCombinator. If you need the money and YC is where it's at, do YC. If not, find out how much burn you'd need for a year and go contracting to save up the cash. You can normally get enough money contracting in a year for a further two of frugal living or one for several frugal folk. If you can't get traction there, then you have a problem that YC might not be able to solve.

You can put 105% into a startup and get 0% out.

You can put 20% into a startup and get 10000% out.

Real life is not like an inspirational half time locker room speech. A lot of these companies you see putting 100% in, I see setting themselves up for failure by betting their lives on a plan that only works if they grab the rope, jump over the scorpion, and hop on exactly the right sequence of crocodile mouths. They don't have to do that. DHH just had Zonda commission a supercar for him. Did he put 100% in during 37signals first year?[1]

[1] Hint: no.

I really[1] like your footnotes.

[1] Really really

> You can put 20% into a startup and get 10000% out.

Really? I don't know anyone who does anything with 20% focus and effort put in and gets 10000% out. Then again, maybe we're talking cross-purposes as to what gets put in or taken out.

As for DHH, he wasn't at 37signals until 2003, so I'm not quite sure where you're coming from with that. I'm not even sure DHH is a good example as it wasn't like he came in as a partner (at least AFAIK, but please correct me if I'm wrong), so clearly he had to put some effort in in order to become one.

I think he means that the outcome is not required to be proportional to the input. I have a couple examples of my own that I can use to demonstrate.

The business that pays my rent took me the better part of a week to build and launch 3 years ago. I've gone literally months without opening the project in an IDE, marketing it, or thinking about it beyond answering an email or two. And the profits keep rolling in.

Some years back I was part of a 6 man dev team at a 20 person startup, burning through 60 hour weeks and $8M in funding to build the mother of all SaaS products, which over the course of its life brought in roughly the same amount of revenue as the product mentioned above.

So, as the grandparent said, there's no reason to expect that effort and outcome are coupled in any way.

You think everyone who's ever had a "fuck you money" exit put 100% focus into their company?

I don't care to argue about DHH's position at 37signals. He's the one who said he built Basecamp as a part-time project. He has me at "custom Zonda supercar".

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