Ask HN: living on savings while working on startup? | Hacker News Reader

Ask HN: living on savings while working on startup?

10 pointsBadassFractal17 comments

I'm contemplating quitting my full-time job to dedicate myself completely to a project that I've been working on part-time for half a year. We have no seed money yet and no prospective customers, but I feel that having me on board 24/7 rather than 3-4 hours a day + weekends would speed up our progress immensely and help us have something working to show to potential investors and customers much sooner.

Who here has dropped out and made no income whatsoever for some time while working on their project? Have you regretted it? Anything one should know before going through with it?

Thanks!

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I'm about 3 months down this path. Here's my approach and advice...

----My Approach----

I'm a technical founder with no co-founder. 12 years of back-end development experience. I think I am pretty good on the sales and marketing side (although it's still unproven).

I enrolled in a local business mentorship to keep me sane (and get me out of my home office every once in a while), get feedback from other entrepreneurs and get help with various parts of starting a business.

My general life philosophy is to jump in, then figure out how to swim.

I'm using a combination of savings and friends & family to fund the project. I currently have 6 months of runway to get ramen profitable.

My product is B2B SaaS. I need about 20 customers to get ramen profitable.

I am outsourcing the design, which is my weakness. Everything else falls on me.

It took 3 months of 8 hours a day, 6 days a week to get the beta version built. Demos are actually going out tonight and public launch is next week...yikes!!

I feel very confident that I can sell 20 subscriptions in a few months, with only half my time dedicated to sales.

----My Advice----

If you're not building a B2B SaaS product, don't quit the day job.

If you are building anything consumer-focused, definitely don't quit your day job.

Do you work well under pressure? I have a wife and a son and a decent monthly nut I have to cover. I work best under pressure. But I have never felt this level of sustained pressure before. It's incredibly difficult to keep pushing hard all night every night (I work at night when the house is quiet). If you don't thrive under pressure, don't quit your day job. Be brutally honest about this one because it will crush you if you think you are but aren't.

Outsource your weaknesses. It usually takes a while to find any technical support that's worth a damn. Be prepared to pay top dollar for it. Post your needs on all the outsourcing/freelance/crowdsourcing sites. Post it on craigslist (both locally and elsewhere). I found that each site has a specific pool of talent that's worth a damn. This will take longer than you think. You'll have to cycle through several 'perfect matches' before you find somebody that's the right fit. This piece really comes down to serendipity and luck and there's not much you can do to hack it (other than being persistent and patient).

Estimate how long it will take to build the MVP. Be conservative. Then double it. Seriously, double it. Then you'll be in the ballpark.

Spend half your time on non-coding stuff. This is the hardest part for a technical person, but vital. Even if you have a bizdev co-founder, it's your idea, your vision and you're the only person that will ever understand it.

Again, assuming B2B, get out a talk with customers ASAP. Talk with 3 potential customers. Pitch each one, refine the pitch, go to the next. This is absolutely paramount. Everybody says to do this. DO NOT UNDERESTIMATE THIS!!!

I was unable to find a co-founder. I think this is a blessing in disguise. I tried to recruit one at the start (spent 2 months on it). We couldn't agree on terms. That 2 months was not very productive. We'd spend a lot of time talking, not much time doing. It's incredibly easy to just spend hours talking, theorizing, hypothesizing, thinking. None of that really matters. The only thing that matters is shipping a product. Even if it's complete garbage, ship the damn product ASAP! If you engage potential customers (see the previous point), you'll have a significantly better chance of the product gaining some initial traction.

Last piece of advice would be: you have to sell this product. You can't hire anybody else (even if you have a biz dev co-founder who should also be selling) to do this for you. If you don't have the nerve to get in front of a customer, the skill to communicate with them effectively, the thick skin to hear how much your product sucks and the balls to ask them for money anyway, then don't quit your day job. If you are the idea person, then you HAVE TO SELL IT!

---End Brain Dump---

Hopefully there's at least one or two nuggets of truth in there that resonate with you.

Keep us posted on your progress. Everybody on HN is here to help you. Just ask.

How did you find a business mentoring program in your city? Are there any resources that you are aware of? I am in the US and would love to be part of such a program.

It's usually called the Department of Business Development.

It might be at a city level, a county level or at a state level. There's also the federal option of the SBA.

They are not that hard to find. Just call your city's mayor's office or town hall and ask.

This is definitely resonating with me. Could I get you to say more about "If you are building anything consumer-focused, definitely don't quit your day job"? What do you see as the biggest obstacles in building a consumer-market product?

I'm in this business to make money.

Anything consumer-based requires a huge user base because you can only charge a small amount per user. Huge user bases take time (read: a lot of money) to build. And users are very finicky and not very loyal. They get bored easy and move on to the next hot thing.

This idea of building the huge user base first, then trying to figure out how to monetize it later is way too risky for me. One false move trying to monetize it and your entire user base just disappears. No thanks.

To summarize, my opinion is that, based on my limited experience and common sense, B2C products are way more risky than B2B.

I think B2B is much less risky with a lot more opportunity to actually make some money. It's (relatively speaking) very easy to monetize a B2B product. And there are so many niches that it's very easy to find a product that adds value.

My comment of not quitting your day job if you're going after B2C assumes you are trying to bootstrap your startup. You simply don't have the money to bootstrap it. If you are going after VC money, then you'd have to get the VC money before quitting the day job. However, you won't be able to get the VC money til you can prove your product can gain hundreds of millions of users. It's a catch-22.

My advice for anybody looking at doing a startup is to stick to the boring B2B market. Don't get swept away with a grandiose idea of building a hundred million user product. Even the most pedigreed players in this space can't figure out how to manufacture huge users bases (i.e. Color).

Okay, thank you for clarifying and expanding on that.

Thanks for the extensive response, much appreciated! A couple of questions:

- tell us more about how your mentoring arrangement works. I've never heard of business mentorship before (I've only done mentorship at work at my organization), is it suitable for someone doing an agile lean startup like you are? Also, how does compare to finding an actual mentor from the startup world (unless that's exactly what it is) and how do I sign up? :)

- best of luck with your demos, it's an exciting time!!!

- tell us a bit more about your experience hiring a designer

- I didn't quite get the tech support part. Are you talking about "tech support" or someone to support you with the engineering work involved in developing the product? If it's the former, are you looking for some small company to help you or just for an individual person you can train to understand your service?

- How did you get in touch with your current potential customers? You talk about the importance of being able to sell the product to a customer yourself, as a backend monkey myself I've been as far as possible from that aspect of the business in my career. Tips?

---About Business Development Programs---

Most mid and small cities have some sort of business development program. The goal of these programs is to generate jobs in the local community. I googled 'reno business development program' and came up with this link: http://www.nsbdc.org/

The business development program I'm in provides hours with a life coach (for time management), marketing consultant, SEO consultant, web designer (I don't use this one), a CPA and a lawyer. They also provide introductions in the community.

I think the stated output of the program is a polished business plan. Everybody in the tech scene scoffs at business plans (and most of it is justified). However, if you want any financing, you'll need one. And it's actually a very powerful tool to help you focus and answer questions you haven't thought about yet. A business plan is really for you, not anybody else. At least that's the value I'm getting out of it.

The program is not internet startup specific, but you really don't need that (I'm assuming you've never started a business before). You need help with the basic nuts and bolts of operating a business.

The primary benefit I get out of it is accountability. You commit to certain milestones. Then you're on the hook to deliver. Personally, I really need this type of support.

---Hiring a Designer---

This one is very tricky because design is so subjective.

I used oDesk to find my designer.

I'm very picky about design aesthetics, so I can be kind of demanding. I looked at a bunch of portfolios and tried out a couple designers before I found my guy.

I would give fairly specific instructions that still had some room for artistic interpretation. I was partly evaluating their ability to read directions (most people suck at this), turnaround time and the quality of the work.

Again, being subjective, the quality was really just 'do I like it'.

I ended up working with a Romania designer that speaks perfect english, turns out great work and is really fast. The only downside is that I pay $25/hr for him, which I think is pretty high for outsourced design. He's worth every penny because of his efficency and the fact we don't have to go back and forth iterating a bunch of times. Usually his first pass only requires one round of minor tweaks.

One note of caution would be to not get too picky with minor stuff. Perfection is the enemy of good enough. You're just going for good enough.

---Technical Support Clarificaiton---

I was referring to finding technical talent/resources/people, not the specific operational task of 'tech support' or 'customer support'.

---Engaging Potential Customers---

Coming from a similar background, it's pretty scary, isn't it?! :)

It's actually not that scary. The hardest part is just doing it. People are nice and want to help you out.

Leverage your network for potential customers.

Make sure your first interactions are with lower-value potential customers; preferably customers you have a personal/existing relationship with. You don't want your first customer interaction to be with a high-value target because you will fall flat on your face! Inevitably the customer will ask you some really simple obvious question about your product/service and it will completely blindside you because you never thought about it. Yea...get those questions out of the way in the lowest risk environment.

The purpose of your first interactions is to feel out the space you are trying to work in. Do they have an existing vendor providing the same/similar services? How much is that service? Do they like it? What do they like best? What do they like least? What's it missing? What pains are they having (probably not within the space you are trying to be in, but very important question to identify other synergistic opportunities)? How can you help?

Notice it's really going to be a lot of asking open-ended questions and listening. Common sense stuff, but most people screw it up and talk too much.

Talk just enough to establish expertise and trust, then shut up and let them tell you want to build.

------

Wow, that was a long response. Good thing I get paid by the word. Haha.

Concentrating on your idea full-time will certainly move it along faster than if you are working on it as a side-project.

However, this self-funded model can also be a slippery slope to self-bankruptcy if you're not careful. I would suggest laying out a careful plan beforehand. Figure out what your base living expenses will be, and determine how long you can go on 75% of your current savings. Set some realistic goals and expectations while you have a clear head (now), and as you start to approach a critical low-cash point stop and evaluate where you are vs. what you expected.

Keep in mind that this might make it harder for you to find a job if you take this personal sort of time and it doesn't work out. I would only suggest doing this if you can live for 8 or 9 solid months on savings, and STILL have another 3-4 months of savings to live on after that. 6 months seems like a good checkpoint time, you should have made some serious measurable progress by then. If you haven't, you'll need to start looking for alternate income, which may be time consuming and take a couple of months.

I would also suggest around the 5-6 month checkpoint trying to speak with some angel investors. Partly for the obvious point of raising money, and partly to get some unbiased outside feedback as to the viability and potential market of what you are working on.

How uncommon is it for entrepreneurs to take the plunge and have absolutely no income for those 6-12 months? Is this something that's theoretically possible, but most people choose not to go through with it because they would much rather not bankrupt themselves, or do folks actually do it?

It's just that most success stories you read about these days involve some sort of seed money / angel investment that at least guarantees you don't need to immediately start depleting your reserves.

In any case, when you say 5-6 month checkpoint, is that from the moment one would hypothetically start working on startup full time, or while still doing it part-time?

5-6 month checkpoint is from the time you go full time.

I hear of people doing it from time to time, but I generally think the self-funded folks fly under the radar. When people raise money you see more press coverage, so in terms of what you read about online I think the visible data may be slightly skewed. I know many many people that worked for some amount of time (usually less than 1 year) self funded and then either raised money or pulled the ripcord and went back to work.

I do not personally know many who were able to get to something near break even or viable in less than 1 year. But that is just me.

What I read on other sites was that people would be ok with making considerably less than what they were at their full time jobs, for a long while, as the business is ramping up. So if you were making 6 figures before quitting, now you'd be making possibly under minimum wage :|

On the other hand if there's a strategy behind that and you can clearly see how you'll get to the light at the end of the tunnel, sucking it up for a yearish shouldn't be too awful.

I've done it. Lived on just savings for 9 months before getting some seed funding, which lasted 4 months. Then, we made a pivot so that was another 6 months of savings and counting, but we are close to closing an angel round. My cofounder did the same.

I prepared enough savings to last about 2 years (living very frugally) before I took the leap. I'm single.

Do I regret it? Not really. Not even if this startup fails and I deplete most of my savings.

However, two things I would maybe do differently:

1) I would have kept a job while I networked and learned more about the startup world. Seeing how you are on HN and read a lot about other startups, your case is probably different.

2) I may also have started with less savings. I think I worked at a slower pace in the first 9 months than I am working now, because 1) I was burned out from corporate and 2) I knew how long my savings could last me for.

- How easy do you think it is to get a job back should something go wrong with your startup endeavors?

- Are you married? Kids? - If not, taking a plunge obviously becomes much more easy.

- Would you be able to remain motivated for a fairly long time while living frugally?

- I'm a technical guy with great credentials and some very high end industry experience, I'd be able to find a job with one of the big boys (where I'm at right now) in a blink of an eye, even though I generally hate interview processes and would much rather never have to do one again :)

- Will be married very soon if everything goes well, but my partner is very supportive of me and I see it as a plus as far as starting a company is concerned

- This one is tough, and definitely a good question. I've been making quite a bit as a corporate drone for several years now and so I don't remember last time I had to question a purchase. On the other hand, I'd give up almost everything to never have to see management's face again, go through performance reviews, fill out HR questionnaires and have to play office politics for that measly bonus, all while not learning anything new as an engineer in a long time. To me, not hating myself every day is worth more than probably 75% of my salary :) From a motivation standpoint, I feel that the fear of running out of money and the terror of having to go back to writing emails 80% of my day in corpspeak will be sufficient to keep me crunching all day every day.

Cynicism apart, it's all about being able to work on something that I'm ultimately responsible for, something that someone cares about and have a purpose in mind, those three are a huge motivation to me, and have been for the past half a year I've been doing 80 hour weeks.

You said it...responsible for something that someone cares about. Find that out first if it is something someone cares about. If not you could be spinning your wheels for a long time.

Agreed, I myself feel that an idea is worth nothing if there's no real life demand for it. It has to be tested.

Reminds me of the basic programming rule of thumb where if you haven't tested a piece of code, it is to be considered broken.

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