Ask HN: My Startup is Going to Die Because I Messed Up

Undercapitalization is one of the most common reasons a company fails. Have successful businesses been started with $5,000 or less? Sure. But don't drink the Kool Aid. Lesson #1: it usually takes a lot more than $5,000 to get a business going and to sustain it long enough to reach break-even. In your case, just think of it this way: any salesman worth his salt is unlikely to work for less than $5,000/month...

Lesson #2: at the age of 24, if you don't have even $5,000 worth of savings that you can afford to blow and need to borrow that amount from family, you should probably take a step back and think long and hard about your financial priorities. Depending on your location and your education and/or skills, you can probably earn $5,000/month, if not substantially more, working for someone else. Yeah, that's not as cool as starting a business, but opportunity costs are greatest at your age. What's really not cool: wasting away your twenties and having nothing to show for your efforts once you hit 30. Sure, everybody in StartupVille is always one venture away from a big exit or a $100,000/month business, but when you go to conferences and meetups and see thirty-somethings who have no net worth because they've been swinging for the fences since they were 20, it isn't pretty. Bottom line: at your age, in the absence of substantial existing savings or alternate sources of income (a trust fund, etc.), working on anything that requires you to "work for free" for any length of time is likely to be really, really harmful to your finances in the long run.

By the way, I see from your past Ask HN submissions that in the past ~60 days, you've been thinking aboout "an opportunity in creating an ad network for a niche market" and looking for ways to accept payments for iPhone apps you've developed. Since your business here is apparently unrelated to these, I'll add lesson #3: if you're going to start a business, you must be 100% focused on that business. When you keep taking your eyes off the road, you're more than likely going to crash.

Thanks for your posts.

The ad network idea started when my cofounder here first got his other job.

You're definitely right though. I appreciate your insight in both of your posts re: the opportunity cost of running a startup at my age. I have a degree and could get a decent job. Sometimes it's good to see reminders of that option, since I've always leaned towards starting my own business.

bootstrapping usually means both getting a good job working for someone else and running your own business. Getting to the point where you can pay your own rent from your bootstrapped business is a huge milestone; one that will take serious effort to achieve.

I agree with the general gist of your comment, but I think your "bottom line" is overly harsh.

I went to college from 20-24 (I had worked for a gap year before then), took about 6 months off to finish a volunteer project I'd started in college, worked for another 2 years, took another 18 months off to work on a startup (that never made any money), and then have been working since then. I just hit 30. My social security statement looks like $money, $0, $0, $0, $0, $money, $money, $0, $money, $money, $money. Except that each time I hit $money again, the amount is double what it was before. My net worth is doing fine - if I didn't live in the Bay Area, I could probably buy a house free and clear in most parts of the country.

Your 20s are the best time to take financial risks. After you get kids and a mortgage, you have responsibilities that really do make it difficult to spend any length of time without an income. But in your 20s, you can live cheaply, you don't have anyone depending on you, and you're still figuring out what you want to do with your life. Taking some time off from the corporate meatgrinder can pay some big dividends in increased skills and self-knowledge that make it more than worthwhile later.

Just be smart about it. Don't throw good money after bad, know when to call it quits, keep in mind what you want to gain from the experience, and remember that there's nothing shameful about getting a job.

Look on the positive side - $5,000 isn't a ton of money and people are failing at business every single day, usually losing a lot more too. If I were you I'd get a job to pay back the money borrowed from family and then bootstrap another startup again, building on the lessons you learned from this experience.

You're right.

Thank you for the encouragement.

$5,000 is less that the price of tuition, and I've definitely learned more than I ever did in a semester of college.

Maybe because college is aimed at something different? that's like comparing pears and apples. You learned a lot, but that doesn't replace college education/networking/etc (and college doesn't replace what you learned doing your own business either).

DONT. STOP. NOW. By all means get a job to pay back debts etc but KEEP GOING. :-) . that tuition you just paid will be for nought if you don't start your next company soon. (not suggesting you were going quit but beware that in your situation the worst thing that could happen is that you go get a "comfortable" job.)

This. I don't think your business is doomed, but this is a good time to think about what you've discovered and ask "What kind of business do I want to start? How, where, and with whom?" You're much better informed than when you last made that decision.

You've learned a lot about business, and it cost you a lot less than an MBA. Given the time and money you've spent, you're in a better position than most 24 year olds.

For future reference: very little of what you spent money on is in the critical path for B2B sales, which I assume is what you are doing. One might decide to sell the software to at least one person, then write copy and design flyers. After you have one sale, $1k is presumably not a lot of money. (I am hearing high touch sales so presumably you priced at least in mid four figures, right?)

P.S. Anybody can say you infringe on their trademark, but no one you need to worry about would call you about it. The proper response is "Thank you for your phone call. We will take such steps as the law requires.", then do absolutely nothing until a lawyer C&Ds you on paper. That is the minimum for legal threats to raise above the level of noise.

Thanks for your thought and responses. I appreciate them.

The other business owner has said they've pursued other trademark suits in the past. He said they've found that approaching by phone first has been a more pleasant way for them to solve problems than first sending a C&D (I'm sure, if for no other reason, than to save on lawyer fees).

So you're saying I should wait for an official C&D? I have little doubt that he'll send one. But I should wait until I actually receive it.

Yes, he's saying wait for an official C&D. When the other business owner said that approaching by phone first has been more pleasant, he actually means it has been cheaper (for him).

90% of people who say they'll get a lawyer involved never do (the kind of people who get lawyers involved, start with a letter from their lawyer).

That's not to say you don't need to change your name/logo, if it really is confusingly similar to someone else in the same industry (if they're not in the same industry, trademark doesn't apply). If there is a problem there, you'd want to remedy it. But, trademarks are pretty specific. If the guy is claiming a trademark on a generic word, you can probably safely ignore him (i.e. if I claim "Joe's Soda", and someone else makes "Sam's Soda", I don't have a case against them...but if someone made "Joe's Cola" I probably would). Also, if you both do business regionally rather than nationally, and he is not in your region, he probably doesn't have a case (though if he has a USPTO trademark and has more than one location, he might, anyway).

As you've learned, it's much better to figure this stuff out before you invest in printing and logos and such.

Didn't Facebook trademark "facebook", "book" and I think "face", too?

Are you in the same business domain as they are?

IIRC the way trademarks work is that they are issued for use in specific application area. A business that is using Xyz for a bakery does not violate an Xyz trademark of, say, a welding shop.

So the trademark owner doesn't own the .COM domain. I suppose they are not in tech? Perhaps you can offer to link to their website (e.g. if you were looking for Paint LLC, go to here). Otherwise, a change of name is not a big issue, even big companies do it.

The other thing is that there were even two Apples in the world, just doing different businesses.

Don't carry this too far, the owner of a federally registered trademark can sue the hell out of you. I would not play this wait and see game. The trademark database is easily searched.

Edit: US Registered Trademark search: http://www.uspto.gov/trademarks/index.jsp

I think his point was that you shouldn't redo everything because someone phones you up claiming to have a trademark. Give the response he mentioned then go do your homework. If you're actually infringing, it's prudent to stop before the lawsuit arrives.

I would call you, because I am a human being and not a lawyer zombie.

If you don't care or mis-interpret my "being friendly" as "I don't really care", well then its your own fault (and cost).

But claiming that anybody serious would immediately run for a lawyer is... well, a really pessimistic view on society.

>> "We will take such steps as the law requires."

Yikes! How about "thanks for telling me, I'll check and get back to you, maybe we can find some level of agreement."

You sound like you have a good idea of what went wrong. But surely you got a lot of things right too. What were they?

It would sound like your mistakes point to a lack of research. It sounds like your co-founder isn't a friend, so you didn't know enough about him to get started with.

Finally, this isn't legal advice, but don't give up on the trademark situation yet. Especially if you haven't launched. I'm not so sure the other party would be willing to pay lawyers for a lawsuit, especially onsidering there isn't much to get out of small bootstrapped startup. Also, if you haven't launched, then you dont have very much to lose. You haven't established a brand yet, so perhaps this might be the best time to tweak with this. And of course, you'd want to improve on your branding research this time.

How have you failed if you haven't even launched?

If nobody knows your brand, why can't you re-brand? Did you buy a bunch of useless merchandise, or can you personally tweak some logos in Photoshop to a new name.

What is your partner's role? Sounds like he must be the coder / designer.

More than a plan, it sounds like you need a great mentor.

(I assumed this was a web startup, but you made flyers, so now I'm not so sure.)

We've launched and have been selling product for about 5 months.

My partner's role is that he was the one with the experience in the market. He had the connections to suppliers, resellers, etc.

I edited the post above to explain a bit more of the business, and the reasoning behind flyers and some other merchandise. Beyond that, I could tweak some logos and start over. I've replied with a couple of concerns I have with that in other posts.

Thanks for your feedback, I do appreciate it.

There's two options at this point. Keep the business going or give up.

There's no way anyone can make that choice but yourself. Many people will say "don't give up" but there is little to be gained if the business is going under and you start throwing more money - or other people's money - down the drain.

On the other hand the business shows promise but needs more time and funds, none of which you have right now.

There is another option - suspend business operations, if possible, and rebuild your funds through a "normal" job or consulting. If the business is viable you should be able to relaunch at a later date in a stronger position, perhaps with better partners. If it isn't, you can try again with a new idea.

Knowing when you stand and fight and when to retreat to fight again another day is essential.

Very helpful. You're right, there are two options.

I've considered suspending the business as you mentioned. Which would be quite easy to do, our burn rate is negligible (could be near free). While earning funds to continue operations, I could spend personal time rebuilding the brand materials.

My concern is not knowing how to approach a business cofounder who would be entirely uninvolved in such effort. Can I make a clean break and take over that portion? Or, essentially, start a new company on my own? Our partnership agreement is very basic, and does not cover this situation.

So I would be unaware of what would be right both ethically and legally. Thoughts?

Ethically I think the right thing to do is talk it over with your business cofounder, and to come to a mutually-agreed decision.

Is your business a company with two owners or a partnership? If it's the former, I think you'll have to buy out your cofounder's shares. To determine their valuation, I think you'll have to talk to an accountant. If it's a partnership, I think you'll either have to get a new partner, or start a new business.

And I might be wrong, as always.

LLC filing as a corporation.

If I decide to pick up and run the project solo, I'll definitely work with him to a mutually-agreed decision. Thanks for your comment.

Have your ex-partner sign a release of his interest in the LLC. He basically gives up all his rights to you for the business. You can convince him to do this by telling him that you will take on the trademark suit yourself.

Then I would wait for the C&D too, like patio11 said. Most people that have been in business have sent and received both, and many are in a position like me where I can just have my lawyer buddy change the name from the last notice he sent for me, and he does it for nothing (or a beer). So a C&D is really not that expensive either - and if he won't do that he probably doesn't think he has much of a case.

You can do a quick search at USPTO.gov for federal trademarks, but don't forget to do it at the state level too. This guy may only have a trademark at that level and thus have no case against you. If he has a non-ambiguous federal trademark for your industry, then you should bail out of the name immediately. I once spent $3000 on lawyers fees because I bought an $8 domain name with somebody's trademark on it. I had to give it to them of course, in forgiveness for them not suing me for damage. Oops. If you have to give the domain over, you may find middle ground by convincing him to let you redirect it to your site for a while so your print advertising doesn't go to waste.

One more solution comes to mind if the other company is in the exact same business as you. Team up. Figure out how you can mutually benefit from each other. It might help your business get going better, and may handle business he can't reach because of distance.

Legally, I have no idea as I'm not a lawyer and even if I were I'm probably not even living in the same country, let alone the same state. You really need to talk to someone qualified to answer that.

Ethically...I think as long as you are above board and honest with all parties, explain the situation and what needs to happen, then you're probably OK. Running a business involves making hard decisions such as firing employees and dumping cofounders. If you can't face doing these things then you're not cut out for running a business (I've had to do it, and hated it). However it's important that even when you have to do these things that you are honest and as decent as possible at all times.

I think you only go under when you stop refusing to die.

Our company went completely under (Chapter 11 stuff), we lost all staff and had legal threats from all sides.

After a few weeks of misery we decided that we don't feel like dying. We went all-in and turned it around on a shoe-string budget in a matter of months.

Keep refusing to die, and you'll be fine - it just won't be easy!

Product and sales first. It sounds like you spent your marketing money way too soon. Later you might have found out that your offering was not even what customers really wanted. Then you're back in the same position where you've spent everything on marketing, and have no money to make more appropriate materials.

Here's your next written business plan:

1. Build something you can show off - a product, a demonstration of your service, whatever. 2. Show it to anyone who will sit still. 3. If 2 out of 10 people are not trying to buy your stuff or hire you by the end of the demo, pick one from a,b,c below:

a) show it to different kinds of people b) revise it and show it to more people c) take whatever you've learned and can recycle (code, art) and go back to #1 above.

Yes, a thousand times yes. On a $5k budget, marketing was the last thing you should have been spending money on.

The number one thing that you have to do as a startup is sell, sell, SELL!! (http://www.youtube.com/watch?v=S8H2FIf1oH4)

I'm also bootstrapped. I am not sure if I'm really a 'success' yet, but I'm beyond where you are. I've been running businesses all my life and it's kinda hard to pinpoint where this one started, but I started selling my current product in 2005. At this point, my company has around $200K/year in revenue, which is about double what we had the previous year. I have one full time employee, and I can pay myself $30-$40K/year while buying the equipment required for growth without debt; so we're ramen profitable, but not yet opportunity cost profitable.

I am not sure why you are giving up at this point, but I can point out some mistakes you made that I don't think you see:

It's fine to bootstrap on five grand; but if you only have five grand? you will almost certainly need to keep your dayjob. I have been running side businesses for most of my life, but for nearly all of that time (until 2009 when prgmr.com really took off) I also had a dayjob.

Dayjobs are great. Someone else gives you enough money to pay your rent and keep yourself in personal computers, chairs, food, etc... and more importantly, someone else pays for your training. I've always worked as a SysAdmin, and I've learned a whole lot operating other people's fleets that I could turn around and apply to my own operations.

Most companies are okay with your side projects. be up front, most places have a form where you write down your own 'inventions' or whatever before they hire you... but again, if we are bootstrapping and not swinging for the fences, there's little chance of your employer becoming interested. To most companies, another couple hundred thousand a year is not enough to bother the lawyers about.

Note, the company will be bothered if it looks like you are spending effort on your project at the expense of spending effort on the stuff they hired you to do. Once I was asked to choose between my own business and my dayjob. (I chose the business... worked on my business for a few months then got a full-time contracting gig)

I've always cycled between a full time dayjob with benefits (get one every time COBRA expires.) corp to corp contracting gigs (for venture capital; I am in a capital intensive industry; corp to corp gigs allow you to spend pre-tax dollars on business equipment... but be /very careful/ with this- tax debt is not discharged through bankruptcy. Once you have enough revenue that paying taxes on all of it would be a big deal, get an accountant. Note I said revenue; this counts the money you are getting from the corp-to-corp contracting gig.) with the occasional month or two full time on the business mixed in.

Next, avoid loans as much as possible. you /will/ fuck it up. Over and over. It happens. Without a loan, you really only return to zero, and eh, you still have that dayjob, right? it's not that big of a deal to be at zero when you get massive checks every month. I mean, you can also return to zero with bankruptcy, but to make that worth the lawyer time, you need to get fairly large loans, which isn't as easy as it sounds. Getting $10-$20K in debit is irritating, can kill your business, and usually isn't worth the lawyer time and hassle of bankruptcy. And a loan doesn't always look like a loan; at one point I signed a contract for a year of bandwidth at $1500/month; this was back when I needed between 1/10th and 1/100th the amount of bandwidth that the $1500/month got me. I mean, I was launching a product that could have used it, if it really took off, but the product didn't take off, and I was full time on the business barely clearing rent, so I ended up with rather a large amount of debt. (I ended up paying it all off as a contractor... honestly, it may have been best to just fold the company at that point and declare corporate bankruptcy; maybe they wouldn't have come after me personally? I don't know. but my point is that leases should be looked at as debt.)

Spend dayjob money on rent at the place where you sleep. Spend the five grand on flyers and other business expenses. (though, five grand is a whole goddamn lot of flyers and business cards. $50 worth of businesscards gets me and my employee through a year, usually.)

If you only have five grand with zero income, the office fridge wasn't your big mistake, the office was. You can get an office once you have business income. Until then, use your garage or front room or what have you.

Anyhow, if the other business owner called you rather than sending a lawyer letter, he's willing to talk. Call him back and explain the situation. Be open about your numbers (this isn't always a good idea, but in your case, you have nothing to lose by letting him know you are not worth suing.) Ask him if you can work something out. This is the advantage of not having any money; Sure, just about anyone could sue you and put you out of business, but there'd be no profit in it; lawyers only work for a percentage of the winnings if they think the winnings will be large enough to give them a better total expected return on their time than working hourly. The guy isn't going to sue you unless he's mad enough to pay a few hundred dollars an hour just to put you out of business.

Of course, if he's a competitor, it probably won't work out. but otherwise, maybe it will. worth a shot.

There are state trademarks and national ones from the USPTO. If his is a state trademark and he is in another state, it shouldn't affect you at all and him harassing you would be malicious interference with a business.

If it is national, you should just change your business name.

As far as the other guy needing to work, that should have been figured out before. I take it you must be independently wealthy to be able to self fund for a long time? You are fortunate, but it's not realistic to assume this is true of everyone. Obviously his debt is related to not getting much if any income after 7 months of working on this venture.

I think your advice is very premature to say the least. You have not successfully executed yet. So you don't have working advice to give. It's strange when this happens, but seems kind of common. So many business books written by guys who don't have experience creating or running successful businesses. A lot of wild eyed speculation presented as fact.

Here is some advice. I see in your explanation you have a list of blaming other people. It's the cofounder's fault for not working more and wanting to earn an income after 7 months. It's the other guys fault for having a trademark. But if the cofounder worked with no salary longer you'd still have run into this trademark issue. The thing is, if you suspected your product had any chance of working at this point you'd not be giving up on the trademark. You know that the business is failing for other reasons, yet you come up with this other stuff. It's a denial of reality. Figure out why the company really failed. It wasn't the cofounder or the trademark that did it.

Now I know you are reading this and getting ready to press reply and type, "Bugsy you big dummy, didn't you see that I accepted blame? The title of this article is 'How I messed up'." Right, about that. Let's look at your numbered list of the four ways ways you are taking responsibility. #1 says your cofounder is to blame. #2 says the trademark is to blame. #2 says your cofounder situation is to blame. #4 says your cofounder situation is to blame. So you don't actually admit to doing anything wrong. Saying "I made a mistake depending on all these other morons!" is not taking responsibility. It's blaming others, while not even taking responsibility for blaming others.

Was there a product? Were there customers? Was there growth? None of these questions are addressed at all in this essay, and these are the real questions to have been asking. If the company has a viable product, a customer base, and is making sales after 7 months, the co founder wouldn't be walking away due to becoming destitute after 7 months of no income, and the other cofounder wouldn't be abandoning the business over a extremely minor branding issue.

You're right. I wrote my post in one sitting, and didn't realize that I was hiding my own faults and shortcomings in getting to the position the business is in today.

My list was not one of reasons I failed, but one of lessons I felt I should learn from the situation. It is not a complete list of my failures by any means.

I'm sorry if it came off that I'm trying to give expert startup advice. I do not pretend to be a success story, or one worthy of providing advice to startups. But I sure wish someone had told me 8 months ago that I should look into any possible trademark issues with my name, and thought I'd pass that along.

I certainly don't blame the cofounder for our predicament. I was there for each step we took. I was merely pointing out that it's important to figure out the responsibilities of each cofounder, and that it may be wise to understand the life circumstances of your cofounder before diving in. Also, it should be noted that he got a job 4 months ago, not just this week. But you're right, not everyone has the luxury of being able to work with no pay for an extended period of time.

If you read the comments in the thread, you'd know that there is a product, we've been making sales (although not as quickly as we'd hoped), and are at a near break-even point. Yes, I would be abandoning the project too early to tell if we could have been successful. Yes, I was undercapitalized, and don't have the money or passion (gasp!) to redo a lot of the work that we've been doing. There's an opportunity cost in redoing the work that I'm not sure I want to take on alone.

For the record, here are some key areas in which I failed:

1) Undercapitalizing the business. I knew we should have more cash, and I didn't make it happen. I felt nervous and unqualified to approach investors, particularly because we weren't doing something new and exciting, and our goal wasn't to become the market leader, but take a piece of the overall pie.

I wanted to work full time for myself, more as an ideal to feel like I was a true entrepreneur than to do what was best for the business. As others have mentioned, I should have been working and doing this as a side project until it could provide a livable income for me and my cofounder.

2) I often created and even sought out distractions from pure customer acquisition. I spent too much time tweaking this-or-that on our website and other things not directly tied to gaining customers.

3) I failed to motivate myself to get stuff done when my cofounder was out of the office. I could have moved forward with the project without him there. I didn't. This was a huge failure point, for which I accept 100% responsibility.

4) I misallocated some of the little money we did have. Unnecessary expenses that did not contribute to building the business. I wanted business cards, I wanted a nice whiteboard, I wanted an office, I wanted a vanity 800 number. I wanted to feel more official than the business was ready or could afford to make me. And I allowed that to distract me from selling.

5) I began working on the project because I saw the dollar signs, not because I was truly interested in the product or service I was developing and offering. Now some would say that the money is all that matters, but for me, working on a project I was more interested in would better motivate me.

There are plenty of other mistakes I made. But, those are the 5 that come to mind first.

I appreciate the time you took to write a thought out response, and to make me look at more lessons that I can learn, or more of my faults I can work on.

Of those expenses you listed, I personally deem a whiteboard ABSOLUTELY necessary. Don't kick yourself over that one.

Business cards are generally handy to have, but as a personal rule of mine, I don't allow myself that luxury unless I'm at least finished with development (or are attending conferences to which I will need them).

Wow, awesome list. Those are some incredible insights.

You did extremely well with my giving you a hard time, this means that you are definitely going to be successful, just keep at it. (Whether 'it' is to continue with this one or to start completely new ventures.)

Dude, you are just getting started. Someone threatening to sue you is the first sign of success. If you have cash flow fight on. Figure out your partnership issues and go for it.

Caleb,

You only planned to do this for another 60 days. So the only question that matters is whether you can get customers in that timeframe.

I'd continue to work on your business with whatever materials you have on hand. Maybe you can sell your domain and LLC to this guy to cut some of the losses, but even if not just tell him it will take two months to take care of the paperwork.

If he is a total dick and still sues, just shut down your company like you were planning on anyway. In exchange for being unreasonable, this guy will have paid a bunch of money to sue a company that no longer exists, and alienated the holder of the exact-match domain for his business in the process.

I think the best thing you can take away from this is that you got a good little business education for merely $5,000. I think you mishandeld some of the ways you allocated your money, however, and think you probably could have gotten away with spending far less for the same education.

The legal nonsense aside, I'd have started your company while you both still had jobs and worked on it during your off hours. If things began to pick up and you got some user traction, I would have then spent the $5,000 where it was needed. For one thing, if you had done it this way you'd have come across your co-founder's money problems earlier.

I don't think you should be quite ready to throw in the towel.

Have u launched yet? You said you were headed to profitability. What about the original idea as others have mentioned here?

Here's another one:

Plan to dedicate more than 7 months to said startup.

Great point.

I haven't decided to throw in the towel, but I've nearly run out of cash and my cofounder is not around to help.

You're right though, I should continue fighting to make it happen. Spend a few weeks to change our name, forget about the printed materials, and keep working to see if there are legs.

If I were to succeed, how would you (or other HNers) approach the issue with a cofounder, given that he will have not been involved in the additional push?

Either the other cofounder starts doing something to justify their continued stake in the venture or you reduce their ownership %.

Utterly ruthless but this is business. You're already in a precarious position. Don't carry dead weight.

One thing I've learnt is that there is always room for negotiation. Call the other business owner and come up with a time-frame to rebrand your company. Get him to agree with that time-frame and move on.

That way you could use the remaining cash for a customer push and replenish your cash reserve at the same time. Prepare your rebranding peacefully and if you actually run out of cash, you won't have to rebrand (in some countries, this is costly).

Another thing: contact the domain squatter of the other brand. Ask him how much he wants for the domain. If you run out of Cash, consider selling your domain to the other business owner for half the price. Heck, you could even sell your website and design.

Also, making a polite agreement with the other business owner doesn't cost him anything. Potentially having to sue you does. This means that provided you can convince him of your good faith, giving you long enough to rebrand is probably in his best interests.

And, hell, it requires ... a phone call. No harm trying.

What is most important is if your business works (gets traction/clients). The name and branding is only secondary.

Explain to the other company that you agree and will change your name shortly. Start thinking of a new name and get some more clients to get some cash. If you have a good business, than it can also work without a name.

It is sad to have wasted so much money just because of the name. But look for marketing solutions where you don't need to pay anything. If you already had some clients, propose some advantages if they get you more clients. etc.

6) It is hard to bootstrap a company with so little money. I'm all against big funding, VCs and so forth, but $5000 to start? At least you should have enough money for all the founders to live in a decent way for the time needed to get other funds or to get customers.

As was suggested some day ago here, and as I did when I created my social web company (that had a successful exit), a good thing to do is to create an adsense based site, SEO optimized, in order to live out of adsense.

Yeah the other founder probably needed to contribute $5000 too. If he could not, that would have been your first clue that it wouldn't work.

I was expecting your question to be: what can I do to make my company survive? From what you describe it sounds like you're giving up, the situation itself doesn't necessarily sound terminal. Other startups have survived worse situations and succeeded in the long run.

Not saying that you should or should not give up, that's your call. Only that it sounds like a challenge that's no different from the one many other startups faced.

I'd visit a lawyer who specializes in trademark law. Most lawyers will give you an initial hour at no charge. At bare minimum you will learn your options.

I faced the same problem as you ten years ago. I received a cease and desist letter from a large multinational. I handed over the domain name, rebranded the business and I'm still here. So it doesn't have to mean the end of your business.

> Most lawyers will give you an initial hour at no charge.

An hour might be a bit much to ask, but 5 or 10 minutes, definitely.

You haven't messed up yet. You now have an excellent opportunity, research everything you can about companyname and the owner you talked to. Then get yourself on a plane to their offices with everything you have about your company, turn up and ask if you can take the owner to lunch / dinner and pitch him your company. Explain in simple terms that you don't have the cash to change at this late stage, that either you can find an accommodation between both your companies or your company fails. Make an offer of say 5% equity and a link to companyname on your homepage for an agreement not to sue for trademark infringement, I would expect him to make counteroffer, you counter that with something a bit less plus a capital investment of X, negotiate until you have a deal that works for both of you and if you can't, be prepared to walk away, if companyname and your mycompanyname are in the same line of business then you could always pitch yourself as an employee of companyname to the owner.

Do you have your product built? You're already giving up, the worst that can happen is failure which is the same as giving up. Scrap marketing, find a new name and launch. If it fails because of no marketing, oh well that's a shame, if it succeeds then woo! If you give up you're just skipping the launch part and going straight to guaranteed failure.

Terry Matthews is a successful businessman who also does a lot of investing in Ottawa, Canada's startup scene. He's a well-known name in early-stage businesses and the telecom industry up here. I can't source this off-hand, but one time someone asked him what to do about needing to lay off a number of his staff. Terry told him "if you've got a good team, don't lay them off and lose them. Keep them together and start another company with that team."

Admittedly, that's easy to say for someone who's got the money to start companies left and right. What I'm trying to say though, is that while your company didn't work out, and it's quite possible that it looks like there's nothing to salvage, you have a team (or maybe only the two of you, but you keep on referring to 'we') and you'll have another opportunity soon if you keep your eyes open.

Have you talked to someone about the trademark? Do you know if you are actually likely to be infringing?

There are tests that are applied. Also, simply having a similar domain name may not be a problem unless you're directly competing with the guy or you're passing off. There are many limitations to trademark.

Actually, they do not even own the companyname.com. A domain squatter does. Presumably, they can't use it because this company has targeted them before with their trademark lawyers.

One lawyer has said that we are definitely infringing, while another said that there may be some leeway. However, the trademark holder is in the exact same market as us. So many of the limitations you mentioned don't affect his ability to defend against us.

if you haven't launched yet, why not change your name? I understand that there are costs involved, but did you quantify those costs and see if it's possible or not? You don't have to redo everything at once.

I can certainly change the name, even at this point, but that would take up a significant amount of the cash left in the business. That'd leave little for the client acquisition push we were about to embark on.

If I were to take on the project myself, I would be willing to put in more cash for that purpose. But I worry about my cofounders claim to half of the business, and risking more of my own money when he technically has the right to half of the reward.

I'm not a lawyer, but I have done a lot of trademark research for my own business, and I can tell you that you're definitely infringing.

The bright line standard for trademark lawsuits is essentially "would a reasonable person mistake your brand for your competitors?". In this case, based on what you have said here, you have taken your competitors name, and added "my" in front of it. So most reasonable people would conclude that it is highly likely someone will mistake your competitors brand for yours.

If you were in a completely different industry than the similarly named company, then there would be some wiggle room, because you could argue that even if someone was initially confused about the two companies, there is no possibility for them to buy your product thinking it was the competitors. However, you are in the exact same industry, so the likely conclusion is that the customer will be confused and likely to buy your product thinking its your competitors.

Unfortunately, the domain name issue is irrelevant in the face of trademark law. In fact, as has happened with many other infringement suits, it is likely that if you lost the lawsuit, you would be forced to transfer the domain to your competitor.

You're absolutely right. I don't contest that we are infringing.

For the record, we didn't know anything about his business when we chose our name. We merely saw that 'companyname.com' was taken but not used. We assumed (you know what they say about assumptions) that meant we could go with 'mycompanyname.com' and be fine. Had we known about his trademarked business beforehand, we wouldn't have done so.

Thank you for shedding more light on the trademark situation.

I don't contest that we are infringing.

This is not legal advice, just common sense: be careful what you admit online! In some cases, willful use of someone's trademark may entitle them to punitive damages or lost profits.

I didn't know that I was infringing until he notified me. But after doing the research, I am quite certain that I am. I definitely plan on making the necessary adjustments.

> You're absolutely right. I don't contest that we are infringing.

In the future, don't say things like this in writing. Not trying to be hard on you, or to encourage you to be dishonest.

It's just that statements like this can really come back to bite you when they come up out of context in a legal context.

Here's a good summary of trademark-infringement analysis in the U.S., from http://cyber.law.harvard.edu/metaschool/fisher/domain/tm.htm...:

-snip-

In deciding whether consumers are likely to be confused, the courts will typically look to a number of factors, including:

(1) the strength of the mark [DCT note: See http://en.wikipedia.org/wiki/Trademark_distinctiveness];

(2) the proximity of the goods;

(3) the similarity of the marks;

(4) evidence of actual confusion; [DCT note: Proof of actual confusion is not required, but can be powerful evidence of a likelihood of confusion]

(5) the similarity of marketing channels used;

(6) the degree of caution exercised by the typical purchaser [DCT note: Confusion is more likely for an impulse purchase than one in which the buyer pays careful attention to what s/he's getting];

(7) the defendant's intent. [DCT note: Willful copying of another's mark is often taken as circumstantial evidence that consumer confusion is indeed likely, otherwise presumably the copier wouldn't have bothered.]

-snip-

Rebrand. Your defence is tenuous and fight isn't worth the distraction.

FWIW: This appears to be his startup: http://www.myliferesponse.com/ and from his resume, it appears he's the business/marketing partner in this relationship.

I did a quick search for "Life Response" at the USPTO website and the only trademark I found was this one:

http://tess2.uspto.gov/bin/showfield?f=doc&state=4010:8n...

for "Life Response" owned by Midwest Medical Alert Systems, Inc. CORPORATION ILLINOIS 269 Winding Creek Drive Naperville ILLINOIS 60565.

The weird thing is, the business using the http://www.liferesponseusa.com domain is "Life Response USA" and they're a division of CTR Alarm Systems Inc. --- a Pennsylvania Corporation. So that's odd: not the same company as the trademark holder?

More research is needed.

That's the one.

I would make the guess that liferesponseusa.com is not the same business, based on the different addresses you brought up. I wonder if they're looking at a similar situation with the trademark holder.

I'd review the relevant trademark laws before believing a third party. Get an attorney if you still aren't sure. Question everything.

Check out "Health Sentry". There's a 1999 application that was cancelled in 2007, so maybe you could file for it and it's a good term.

Thanks again bugsy. I'll look into this.

I hear you talk a lot about the branding, marketing and your cofounder, but what about the idea? Is it original or still worth marketing? A name change and a cofounder might not be the best reasons to call it quits.

The idea is not original. But the market is lucrative and growing daily. We were completely satisfied with the idea of taking a very small slice of the pie.

I have some questions, email?

In my profile.

Hm i think email has to be in about to show public. I think...

It does.

Sorry to hear of your trouble. Bootstrapping is very difficult and you should not expect 1 or 2 months is enough time to gain traction and be profitable. I would not say you have "failed". Your product may be the best thing no one has heard of. Keep your day job and keep working on your bootstrap. I started out writing code on a thinkpad I bought used on ebay for 200 usd. Talent without endurance is likely to lead to little. Good luck.

1 or 2 years is a more likely timeframe.

"...that is similar to your mark and used on related products or for related services."

That is directly from the USPTO. In other words, if you have a company named "A" that writes software and I have a company name "A" that makes shoes.. I can't sue you for trademark infringement.

A website doesn't matter.. it's the type of business that matters.

The trademark thing happened to the last company I worked at. We just told them that we disagreed with their opinion and carried on. Never heard from them again.

None of these reasons you mentioned is a reason to quit/stop/lose. It doesn't seem you failed for any of those reasons - you failed because you simply gave up!

I've experience with being hit by a trademark dispute and your best bet is to cut off the existing name now. It costs more than you have atm to defend it.

Weren't your flyers used for client acquisition?

business cards are cheap, and for many businesses they are a key tool for client acquisition.

Have a Plan B

That's not the money you want to start with. It gives you zero cushioning if something goes wrong, or if you need to buy something expensive urgently (e.g. lawyer's time).

I have no idea how people begin startups with $10K. I seriously don't understand it. It's nothing. A good developer's time will cost you more than that for just one month.