Ask HN: Should I sell my house to fund my startup? Anyone with the same story? | Hacker News Reader

Ask HN: Should I sell my house to fund my startup? Anyone with the same story?

45 pointsThrowey1283 comments

Everyone says the market is frothy and startups raise unreal sums of money they don't even need at high valuations, yet I'm failling to. I never attended Stanford, didn't work at FAANG and I'm not even from the US, so I don't have relationships with founders/investors. I'm technical, yet need engineers to launch. I built an mvp, pivoted, did customer development etc. I'm full time for over a year, and I'm 25. The market is fairly new and many don't understand it, but I've been working in this space for 8 years, been working with biggest companies. I have multiple ideas I'm confident about if this one will fail. If you had a similar story - please tell it, especially if you failed.

So should I sell my house to fund my startup to some milestone? I don't need cars nor houses, I only care about building stuff and learning, only things that make me happy. Should I YOLO the fuck out of my life?

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No, you should not. Chances of it working out are probably slim. You probably don't need funding, as many solo founders can attest. Hiring should be done once the business is already generating an income, and should be scaled based on that income.

What happens is that if you do sell your house, (assuming you'll pay rent) things will get a lot more stressful for yourself financially, and this will severely hinder your mental performance and chances of success.

An even better idea would be to get a regular job and bootstrap your business in your spare time, on weekends. Once it takes off, you can quit the job and focus full time in it. Successful startups coming from this kind of environments are way more common than those coming from YOLO, all-in approaches you are thinking of. And this is precisely because of the way the mammal nervous system works. The ability to do creative mental work is severely impacted when under a perceived threat (financial doom in this case).

This is an oft repeated trope — here's my issue: I'm B2B, and my clients don't want to hear "get back to you this weekend!"

What then?

Then it is not something they really really need. ‘This weekend’ is awesome if the problem is very very important.

Find a way to resolve it? You could negotiate or find another job that lets you manage the time you need to run your business. I don't think the options are necessarily limited to either quit employment and go full-time on the business or just working on the business during weekends. There's probably more options.

1. Watch this video: https://www.youtube.com/watch?v=gPcgEBbNQvw

2. Recognise that you have an opportunity to practice the courage of telling people things that they do not want to hear.

3. Recognise that when you have employees and investors, they'll be relying on you to tell them things they don't want to hear.

4. Recognise that your future self will find it far harder to practice courage if his past self abandoned him to the risk of homelessness.

Drop them. If some corporate cog thinks having you on a speed dial 27/7 is a good idea, just because they pay, you definitely don't want them as clients. Instead, tell them you are awesome, your product is the hottest shit in town and you work 4 days a week. The language may vary depending on a client, but setting boundaries is part of the game.

Just "business hour" support can take you out of eligibility to (morally) accept a role at another firm.

Morally, maybe, but not practically. You can send emails or answer the phone during your regular job. The odds of you being "caught" are near zero.

Figure out how to solve the problems as fast as possible… yeah it’s hard maybe not the thing for you

Pick a product/market that doesn't require such a level of support / contact.

Pick something also that doesn't need constant human hands/duck tape. E.g. if you are web scraping, and someone changes their site HTML structure on 3pm on a Wednesday, then you have to be hands on to fix it.

If you are running an app that is self sufficient - you put the hours in at the weekend to make it robust, it doesn't bother you during the week, most of the time.

In other words, build stuff that ... scales :-)

If you’re at the point where answering support emails is interfering with your day job, you’re doing pretty well. OP is a long ways off from having this problem.

Do you think all B2B providers responds to issues and resolve them within an hour or two? Most of them take their sweet time. Don't try to be a people pleaser or a yes man. You will just get taken advantage of.

Set boundaries / expectations ahead of time. Tell them you will acknowledge an issue within 24 hours and provide a solution within 7 days _if_ it's important.

Whatever works for you.

You should reserve the right to outright reject feature requests without providing a convincing reason beyond "it's not within our scope".

I've led an engineering team and worked with many vendors. Some while working at a $1bn company and some while working at an early stage startup.

At the $1bn company I would get vendor responses quickly, because we paid for enterprise support. At the scrappy startup I just got used to responses coming a day or so later (especially since I was working with USA vendors while I was based in Taiwan).

If a customer wants a 1-2 hour response time they'll pay much more for it.

IndieHackers has turned into a garbage site as of late. The quality has plummeted and it's mostly people just desperately cold emailing thousands of people while making less than $3k a month.

Low key, in most cases those people would be better off selling fake healing crystals on Etsy.

I've found the businesses I work with are very happy when I say I can get it to them by Monday. I often say this even when I know it will only take me an hour and it's Tuesday. Haven't had any issues.

>You probably don't need funding, as many solo founders can attest.

anyone know where I could read for stories like this? I want to motivated by the story of success solo founders

try

https://www.indiehackers.com/start

and

https://www.youtube.com/microconf

I am from IIT, living in US, On a FAANG salary, 40+ age. And I still stuck paying mortages on my home. I will stuck for next 10 yrs. Don't fuck life by selling off your house. YOLO, happy to build and learn, don't need cars, confidence etc are because of your age/hormones. After a few years, you will want a partner (because humans are social), may be have kids, your wants/needs will explode then. Do not give up the house.

All 25yrs olds are confident their idea will work. Only some listen to older people like me and accept that they may fail.

I'm convinced paying a mortgage is a good thing, it means you have less capital tied up in your home and more available to invest in areas with higher return, such as doge, er, s&p index funds.

That said, if you really hate having a mortgage, don't buy a home. Don't fall into the trap of thinking you need to own a single family dwelling if renting is more your thing.

No. Basically zero chances any of your ideas will work. Even with funds and employees. I did a lot of side projects, maybe 30~ and 2 turned into companies which made me a great, great living and then failed for the most unexpected sh1t.

I’m sorry but you either roll the dice a ton of times with extremely small amounts and hope for a big win Which is very unlikely or you have to play with other people’s money. In case you haven’t attended Stanford, too bad I guess. You’d have to meet rich people some other way.

At this point I regret investing the net worth I accumulated through my companies and investments in more pointless companies of my own trying to shoot for the 9-10 figure net worth. It’s pure nonsense unless you use OPM. I regret not buying a home in bad conditions and fixing it up to luxury and living happily in it with my girlfriend and dog. It would’ve been fun and awesome and wholesome. Then I could’ve done that many times over, slowly building a fancy net worth in decades instead of years but living Vicariously through every minute of it. So since I just turned 24, my plan is to do exactly this.

So no don’t sell your home please

"then failed for the most unexpected sh1t"

I am curious. Would you be willing to tell us what happened ?

If you’re really 24, you have plenty of time to accumulate and buy that house with your GF and dog. Assuming you only started earning at 18, next 6 years likely to far outpace the last.

I'm on my 8th Startup and I can assure you every one of them looked like they are definitely going to work out and I should YOLO the heck out of them.

But reality is obviously different. Not YOLOing and keeping my day job let me work on the next one without too much stress and let me improve my skills as a founder.

Finally my 7th one (which I started with a group of friends) is going some where and I'm working in parallel to launch 8th (with same guys) while we are trying to improve traction for 7th. I can confidently say now that startups are less about technology and more about getting to solve customer problems. Often even the idea isn't going to be original but as long as its helping some one, there is a chance to make a product out of it.

You should never risk you personal wealth on startup ventures, ever.

Startups the SV way are hard to do, if you are not part of the bubble. As you said, you don't have an "in" so nobody is going to easily give you money. You have two options:

1. consider a different growth strategy, startups are not the only way to grow a business, focus less on growth and more on stable income, try to acquire at least one recurring client

2. build your reputation, then you will get capital, doing no.1 first will also help you with no.2.

You should never risk 100% of your personal wealth. Risking 10-20% is often a good idea.

I'd say that if your MVP did not convince at least one prospect to sign at least a pilot with you than no additional number of engineers will fix that. You risk to end up with a feature rich product nobody buys minus your house.

Absolutely not. Get a business planner / financial adviser ideally from a reputable bank to review your business plan. They will ask you the right questions. Incorporate your business and keep all funds separate from your personal funds in accounts tied to your business. Get to know other entrepreneurs and network with people. If people believe in your plan they will invest in it. Investors will determine if your plans have acceptable risks.

I don't think it's the craziest idea, and in some circumstances I would probably do that, e.g if I had an extra house or two.

But even in that case I would try to take advantage of the frothy market before selling a house. Raising money is hard and takes a lot of effort even for people with connections and good credentials. But if you succeed it's probably going to be more money and much less financial risk for you.

The best advice I can give to you is try to join a startup accelerator. It sounds like I used to be in the same position as you are (no FAANG, no fancy degrees, not knowing any founders / investors, also a foreigner. I didn't have a house to sell though, lol). Joining a startup accelerator changed that very quickly for me and helped me raise money.

Which one did you join?

Y Combinator.

No!

My recommendation would actually be to double-down on the house and pay off any mortgage you may have on it. Once you have a paid-off house, you have basically infinite runway for playing around with startups.

I remember when I first was considering going full time on my side project. I was convinced that with $200k I’d have enough runway to make it work. I met a VC at a party and even mentioned that plan to him. He laughed (rightfully) in my face.

Our brains are not equipped to predict the money it takes or time it takes for a business to become successful, because the variables are too great. Selling your house would be like me raising $200k. It’d buy you a year. But at the end of that year, it’s still very unlikely that your business will be paying for itself, let alone paying you a salary.

All of the advice you've received here is good, you shouldn't sacrifice your personal security no matter how good it looks.

But! To provide a contrarian example, one of guys involved in creating Guitar Hero faced this exact dilemma and took out a second mortgage on their house in order to fund the first round of production of guitar controllers: https://www.vice.com/en/article/wx8bey/the-oral-history-of-g...

The circumstances were unique because at the time investors were extremely hesitant to fund specialized hardware runs. His gamble paid off handsomely but it's probably the exception to rule.

Went the opposite way, kept the house (not even making directors guarantee) and bootstrapped the startup between freelance contracts

It’s slower, but the contracts keep you in constant contact with real customers, and it’s lots of small dice rolls until one comes up good, rather than a big one that can’t go bad. Plus the house goes up in the mean time

We’re now scaling up the team and looking at capital so it’s worked well

To each his own but I'd never sell something that provides basic life needs (shelter) to embark in an adventure.

Maybe you can consider selling the house (it'll take a while) and pouring SOME of that money into a startup, if that's your dream. But always keep X months worth of your expenses in the bank. Where X is probably >24 or more since you likely won't be profitable right away.

Sure, never planned to pour everything into the startup, just some funding to launch and show more traction, then raise a round, or switch to another idea. Makes it possible to iterate more quickly and try more things, but yeah I will need to pay rent and still will have to get a job if my ventures won't be successful, so not much changes?

You have an idea you can’t explain to investors. How likely is it that you can explain it to your employees then?

Here is an idea. Take debt on CC or a line of mortgage. Pay a contractor or two for a while to develop the product a bit and see how it goes.

Successful founders are great communicators. If you aren’t one, it’s unlikely you will make it to a senior position - whether it’s your own venture or not.

Signal you are looking to sell your house is on when investors tell you - “I understand what you’re building. It’s great. You even have customers MOUs signed and maybe even have paying customers, but I can’t fund you because market size is too small. Good luck.”

You're 25 and working in this space for 8 years?

And owning a house. Are you sure you're owning the house, not the bank?

Yes, started volunteering at 16, got an offer soon and went fulltime. Dropped out of university. At some time I was working on two jobs, one part time of course, and did some freelance while still working full time.

I made more money per month as a 17 yo at the end of the dotcom boom than I did the decade after...

But back to the advice: don't sell your house... Get a less demanding job, even 4 days a week, and side hustle the project.

Also considering finishing your degree as a hedge (assuming it doesn't cost too much, I guess it does in the USA).

Honestly you sound pretty charismatic, and maybe a little dumb. Don't be personally financially dumb. Be dumb with other people's money.

No!

You need a place to live, money for a potential future time when you can't work, and other basic necessities. Investing is about balancing risk tolerance with reward potential. There is a massive risk associated with investing basically everything you have in a startup when relatively very few become successful. It's extremely likely that you will lose it all.

No don't shoulder all risk yourself, find investors, if it ever works out there will be more than enough to go around.

No, here are some better ways.

1- Raise from VCs/Angels with just a pitch deck. Loads of people do this and there's lots of advice online. Big downside is that you give the VC most of the company. Big upside is low personal risk. If you really need to hire engineers immediately (despite being technical) then this is probably the only route.

2- Sell the product to a client before the product exists. Use the money the client pays you to build the product.

3- Save 70% of your income for a year, work evenings and weekends. Quit your job when you've got enough runway saved up.

4- Become a contractor, work 4 months for clients, 8 months on the startup.

5- Start the company with grant money. There are lots of grants for small tech business

I've worked for people who did all of these. Currently I'm trying #4.

Absolutely not. TLDR bootstrapped myself years ago before I had paying customers and market validation. Don’t sell your home. Just don’t.

Get someone to pay for what you are selling. Then find another customer. Iterate and keep building from there.

Once you have established some traction, then you can start thinking about (and ask HN) how to approach outside funding/how to scale the business.

Money follows money. So if you start having success, ultimately you will be able to find outside investment, if you even want it.

Side note: I have worked for several startups. Most in the beginning had investments from friends and family.

Wondering if potential angel investors hesitate because: idea, market size, you.

A dedicated founder in a good market is often fundable.

A little bit of everything. No one knows if this will work because I don't have customers, and it looks like a feature and I can't explain that it will be more than this single product, investors are getting lost. It's impossible to make this startup without a weird path. It's going to be an API in the end, but at the same time I have to show what products are possible to make with it, most think this API is not needed and won't let me put a library in their products, but if you'd talk to potential end customers for these products - they really want it (and I sold multiple products like these). It's a totally weird scheme, so I only pitch the b2c product and then if they are interested tell about this API thing and the vision.

Market is just above 4B$ and is growing well, but it's not like everyone in the world needs this thing.

I have no startup experience, not an amazing dev (barely made an mvp) , never attended Stanford and live in a third world country, so I don't even have connections and rely on highly personalized cold emails.

> I can't explain that it will be more than this single product, investors are getting lost.

It sounds like you need someone to translate this effectively from “techno” to “MBA”.

Messaging is the single most important thing when talking about your amazing product with complete strangers. Don’t discount it.

Maybe look into getting a co-founder?

Absolutely do not sell your house. Get a cofounder. Nobody’s going to fund a random solo person from a third world country who sells their house instead of using OPM. Like would you fund that person?

> I don't have customers > I can't explain that it will be more than this single product > It's impossible to make this startup without a weird path

What the hell is wrong with you?

You have no customers and an idea you can't explain. What makes you think you can build this unexplainable cusomerless thing into a business, let alone LITERALLY mortgage your future for it?

As others have said: No. Under no circumstances should you sell your house to fund... whatever this is. Bootstrap it nights and weekends if you feel passionate, maybe go find a co-founder if you can explain it coherently.

I'm mostly failing to pitch investors, potential customers are excited.

There’s a huge difference between “potential customers are excited” and “customers are paying for the product“.

And the other thing: it’s seems like you put part of the blame on not being born in the USA and not graduating from the Ivy League. That’s not a pre-requisite for success though. If you don’t have connections, maybe it’s you and not the place where you live or your social class.

totally agree - I fell into this trap before of mistaking “customers think it’s a good idea” for “customers will pay”

This video from yc explains how most of our conversations with (potential) users are at best useless and at worse misleading, and how to do it better. Based on the book, “The mom test”

https://www.ycombinator.com/library/6g-how-to-talk-to-users

Totally fair, that's why I want to launch asap and need devs for it. I'm well aware of this trap. I also already sold similar products to companies, and now pivoting to b2c.

Well, it helps. A lot. It's very hard to build relationships from another country, I know everyone will say it's easy because of covid, but it's not for people from third world countries without prior startup/FAANG experience. I might move tho. And yes, problem is highly in myself, but I'm always trying hard to help people and trying to be more open and communicative.

> Totally fair, that's why I want to launch asap and need devs for it.

Maybe you’re right, and maybe you have to learn this in your own way. But it’s often possible to figure out if they’re going to pay for the product without building a full product.

Sure. That’s like playing the lottery: if you win you will make lots of money. If you loose you could end up homeless. Now what are the chances of winning the lottery again? Are you enough of a gambler to accept those odds?

Have you considered raising some capital from existing or potential customers (maybe some who want some specific functionality)? I’ve seen mixed success in my SMB B2B SaaS niche.

Im in a similar circumstance. Do you own it outright? Where do you live? I have a plan to access liquidity (using cyrpto) rather than a direct sale. Looking in to the risks.

Risk someone else's money not your own. If you can't convince someone else to risk their money on your idea, it's probably not good enough even if you manage to execute and ship.

You have a house at 25, let that sink in for a bit. Why fuck yourself when you don't have to?

Have you seen all those startups raising money for the most ridiculous things? It seems like getting funding isn’t such a big deal if you know how to sell stuff. So what makes you think you can successfully sell to customers if you can’t sell the business idea to investors?

Sounds like you may be spending someone else's money? Either that or you have managed to acquire property at a very young age?

If someone else has set you up I think it is worth consideration before you yolo. A lot of work may have gone in to get you where you are.

There is a middle ground - you can take a loan, with or without a fraction of your house as collateral. I’ve never done it so don’t consider this a recommendation, just an idea.

You should do it.

Even if you don't build a successful business/startup, you are going to learn so much that making the money again is going to be a piece of cake!

Not. You will need a physical place to receive mail and work, and can't receive your clients in a dark alley. Many startups started as a room in a home.

Nah probably not. Better idea would be to do it yourself. If you are already technical then there’s nothing stopping you, you don’t need magic engineers.

I wouldn't. Having a place to be is nice for those times when you doubt yourself.

It's not the same being homeless than being unemployed.

What is your startup idea? You’ve got a thread on the front page of a website that’s visited by a huge number of angels and VCs. If you’re going to pitch ever, might as well pitch now.

(Also my vote is no. If you’re already technical, just bootstrap the engineering work yourself. Unless time to market is an existential risk, there’s no reason to hire more engineers. If need be find another cofounder or two to split the work.)

No, you should not YOLO the fuck out of your life.

Keep going, but find a way that doesn't involve risking homelessness.

What's the thing you are working on? How much do you need for some version of "step 1" ?

No. If you can’t convince others to pay for or fund it, you shouldn’t be convinced either.

Can you elaborate why you don't need a house? Do you prefer to rent?

No. Work on the MVP, find a customer and or customer/partner and move forward.

Absolutely yes, if you're out of your mind.

Don't! Haha.

NO!

You are not your startup.

Keep your personal finances as far away from your startups finances.

Doesn't sound like a great idea.

DO NOT DO IT! Start small, the "investors" will own much of your company.

Live with it.

i don't think anyone i've ever known owned a house by 25.

Yeah I was thinking that. So you have a mortgage on it or did you inherit it? If the latter, think pretty hard before you sell it, that is a crazy luxury that a lot of people will never be afforded.

OP is not from the USA. Income inequality is a thing, and properties are not ultra-expensive-compared-to-salary like in the US. Also, programmers often make a lot of money in some countries. My apartment was fully paid when I was 27, all with money from working for this one this one Big Corp which gave me a nice salary.

Also, they may have inherited it.

if the property-salary ratio is small, then what's the point of selling to fund a startup? sounds like it wouldn't provide much runway.

anyway, i don't mean to be judgemental. i'm just thinking aloud i guess, i've known a lot of computer people over the years and some have been spectacularly successful in industry, but i'm pretty sure that no one had substantial equity in property by that age. (or even a mortgage or deed)

to answer OP's question: i don't really know. conventional wisdom is that you should always find investors (not that you shouldn't have skin in the game) but that it's a gamble and they'll be better (and more prepared to take a loss) at making an educated bet than you are. that said, the technology sector is well known for nontraditional and unusual paths to success, so i suppose an argument could be made either way.

i guess the big question is: do you think you can do it and do you have the right people to help guide you along the way?

As long as you have a good pile of savings to fall back on, fuck it, YOLO the fuck out of your life. Why not right? Worst case you can always go back to wage slaving.

The fact that the poster is considering selling their house to fund a startup would seem to indicate they do not have a good pile of savings to fall back on.

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