For Entrepreneurs 1 Year of Runway Helps (If You Can Get It) | Hacker News Reader

For Entrepreneurs 1 Year of Runway Helps (If You Can Get It)

charleshudson.net

22 pointsDanielRibeiro11 comments

The longer the runway, the longer you can go before finding out you don't have wings.

I think it's entirely possible for ideas to have / not have wings, or at least the idea / person / market combo, but wings are not something people can absolutely lack.

If the runway is big, you have to treat it as multiple small runways.

But psychologically, this is very difficult.

To me, having lots of runway is just common sense.

I've been doing the whole startup thing for a year, and I've already started and abandoned several projects, at various stages. Luckily, I have savings that can keep me going for a lot longer, if I need it.

I'm wondering, how do you strike a balance between having a long runway and not falling into a sense of well-funded sloppiness?

Many suggest that the lack of funds forces a startup to be lean and mean, but I can see how appropriating funds has the obvious benefit of allowing you to estimate and plan your risks better.

If its my own hard earned money, I can't fall into the latter category.

Runway aside, you should have already have a direction and an executed prototype already moving you toward that direction before even thinking about corporations.

I don't know where people get this idea that companies come first before good products. Companies are the establishment of two things: Good People and astonishingly great Core Value.

If you're lucky enough to get those two things into the same room then chances are you will grow to a point where creating a corporate entity is a necessity.

Only then can we start to talk about runway.

But to build a prototype you probably are going to have co-founders who are going to build said prototype with you.

Someone(s) is going to have to throw in a little seed money if only to pay for hosting of the prototype.

And between you and your co-founders you would be ill-advised to begin building that astonishing core value and creating out-of-pocket expenses without some kind of legal agreement in place of ownership and ownership %ages.

That's usually what a corporate entity and cap table are for.

I've seen former best friends and college roommates sue the fuck out of each other because they didn't do this back when they began building said prototype.

> And between you and your co-founders you would be ill-advised to begin building that astonishing core value and creating out-of-pocket expenses without some kind of legal agreement in place of ownership and ownership %ages.

If you have grown to the point where co-founders are bickering about cap-tables, then hopefully at that point you have Good People and solid Core Value -- time to incorporate.

The problem with most 'entrepreneurs' is that they only have an idea (not even direction!) and they are already working on how they should incorporate and setup shop.

Business and money for that matter is only the transient result of core value -- something that we should all be focusing on delivering.

In my experience, you're both right. You need the agreements so that the business doesn't get killed by bickering between co-founders, and you need to not spend a whole lot of time on "corporate matters" when you should be building the product.

The advice you hear from "VCs" very often is that the first thing you should do is not just get incorporated, but get a lawyer, an accountant, etc. All of which is premature.

I think many entrepreneurs think they need the 12 months in runway and thus the first step for their business is to find someone to give them the money. IF you go and raise that money from investors, it will likely take you 6 months (seriously) and then you'll hire enough people that 6 months into your 12 months you'll have to start trying to raise money again.

Building a business and raising money are mutually exclusive things. If you have a big enough team you can do both, but the CEO is going to be distracted or will have to pick one or the other.

I submit that the best way to get a 12 month runway is to shrink your idea and your company to the point where you have 12 months without any outside investment. No investors means no distraction. No spending half your money trying to raise more money.

Before you have product market fit you need to experiment on the cutting edge. Once you have it, then maybe get some money to help grow the thing.

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