I lost $209k of my own money trying to start a business
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He spent over half of his money on it as well.
I've had more than one person come to me with their business idea, and they have a terrible website (or app) that they have spent 100, 200, or even 300k on. And it doesn't even work.
If you aren't staring out WITH customers, you either have to code it your damn self, or have a technical co-founder.
It also makes me realize that I'm in the wrong business.
OP's LinkedIn shows he's never worked at a very early stage startup. I really can't recommend that enough before starting a company - being immersed in a culture where things are scrappy helps to instill a reflexive reaction of "how can we do that faster/cheaper" when someone tells you something is going to cost tens of thousands of dollars.
Oddly enough developers' and contractors' costs usually expand to any budget size.
I've been on the receiving money end of this kind of project several times in the past and as much as you try to help and guide, there's almost always an atmosphere of "I'm the one paying the invoice so let's just do as I say" even though everything points to them being absolutely wrong.
I've also been on projects like this where the buyer has a strong vision, is able to communicate it, but is also very hands off when it comes to implementation. With regular reporting (weekly or bi-weekly being ideal) to do course correcting they've gotten tremendous value out of the $100k-$300k spend.
To be fair, being a buyer for tech projects is really quite difficult – especially if you don't have a very clear and communicable vision of the end goal.
The other type, where they give you a lot of money to "do what we say", but don't have good ideas...they're unsatisfying. The work feels pointless because it's not going anywhere. It's weak on the resume, the client isn't ongoing after it fails, you usually don't get references out of it.
If you're short on money then the second type is fine, but you try to build toward only taking the first type of work. (I believe this applies to employment, too.)
It’s $100-$300k to spend a year helping the client figure out what they want to build.
This is one aspect, and having a CEO/Founder with a Product Manager hat on is critical to cost-effectiveness (MVP, low fi design, phasing, derisking, etc.) I cringe every time I see a founder spend money on design before the MVP is figured out and before functionality exists.
But another is cycling thru multiple dev agencies, each of which exploit them in different ways (see my other comment here: https://news.ycombinator.com/item?id=34595540)
The owners wanted something similar, but new looking - so really no added new functionality. Just a design do over, along with better hosting (the webpage was being hosted on the local server of the original designer, some retired dude in his 70s. If you wanted any changes, you'd have to call him and he'd apply changes to the HTML files).
Our cheapest option was a local student who'd charge us $3k for the job. But the owners wanted "24/7 support", so that went out the window.
Next in line, a local design shop quoted us around $7k. Still, no VIP support or whatever. And we'd still have to deal with hosting ourselves.
I had gotten a bunch of other quotes in the same ballpark, but the owner apparently knew a guy in one of the larger IT consulting firms, and they'd offer to do the job for a cool $20k (or around that ballpark), which came with 24/7 support and hosting for a around $2k / year. So they went for that.
Remember, this was just a simple landing page with a typical signup form, and a "modern design". Nothing more, nothing less. Total visitors a year? Probably under 1000.
I can only imagine the prices if they'd want some web app with user registration, login, tools, and what not. I can easily see some consulting firm charging hundreds of thousands for that kind of stuff.
Use real-time APIs to find the best price from: Travelocity, Hotels.com, Expedia One, Scott’s Cheap Flights, Priceline, Hotwire, Google Flights, Hertz, Kayak.
Sync up flights with hotels and rental cars.
Add 15% to everything, book and resell automatically, making it look like it all came from your app.
That 300K is all gone into the backend in a flash.
Agree. Also note that if you are starting out with customers and POs -- and fully outsource -- it isnt the end of the world (as hopefully you have enough money to re-build properly with a tech team that has aligned interests long term) but you'll find that your supplier (outsourced dev) will capture ever greater portions of your profit. This is especially true if they have access to transaction systems where they get to see your revenues, because they will be able to see your pressure point and charge you just enough to extract most of the profits, but without putting you in the red.
It becomes a classic Porter's Five Forces (https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysi...) where the supplier's force becomes ever more powerful.
Our suppliers routinely deliver junk, yet somehow have the ability to just say "it is what it is, take it or leave it". It's not a pure outsourcing type of arrangement either, and they have other direct relationships to our customers, also.
These aren't some randos with questionable reputation. These are big industry players, one of whom a lot of people in engineering would be familiar with, yet they seem to be able to launder their responsibilities.
The other day I estimated how much I would have spent on development costs for my side business if I didn't know how to code and had to shop it all out. The number I arrived at was somewhere around $80-$120k depending on where I hired the devs (were about a year into development).
I get why non-technical folks go into tech but if you're not able to build the thing yourself or have a cofounder that can build it themselves, it's going to be prohibitively expensive and probably won't work.
1. There's an agility to being able to change things yourself, at 2am if necessary. That's very important to startups.
2. There's a discipline to not accruing unreasonable technical debt of the type that will sink you two years in that you can't expect from someone who doesn't deeply care.
3. Managing devs generally requires understanding what's going on. Unless you're ready to hire a CTO with a track record, a non-technical person can't do that.
There's also a long tail-end of reasons. For example, prototyping and tinkering nights and weekends is "free," and can contribute a surprising amount of value. It can't be managed, though; you can't just pay other people to play around, and expect that to be focused in ways which might add value.
*Every* time I've personally seen the playbook of a non-tech founders for a tech startup, it didn't end well.
As a technical CTO I can smell this a mile away and work it into SoWs, but I wonder how many non-technical co-founders fall into this trap.
When you need updates or Phase II, now the rates go up massively. No one else can change it and the outsourced dev agency now has a monopoly. Usually the non-technical CEO/founder will now have to find a new agency, who might pull the same trick or some variation of it. It can be subtle:
- You have no code
- You have code, but it wont compile
- You have code, it will compile, but not into the version you're declared success with
- You have code to the client/app, but not to the backend
Why hire people who don’t care that much to build something the founders definitely care a lot about?
Are there any examples of this working out or are these the 90% of startups that fail?
Personally I’m very technical and I think the best for me would be a partner who is non technical to help me with marketing and sales (something I have no experience in). Would that sort of duo be the best? I can build whatever mobile web backend AI algo shit. That’s easy for me. For my partner I would prefer they are the same level of competence in their side of things.
The main problem was, he didn't really know what he wanted (non-technical).
He asked me to sit in on a couple of his enquiries to developer agencies.
It was a shitshow.
I had respect for the one chap that basically said "Get back to me, when you know exactly what you want."
I had absolutely zero respect for the agency that said they would deliver a full MVP, in three months.
After that, I just said "Screw this. You'll just get ripped off. I was looking for something to work on, so it might as well be this."
It's been a long process, but we are now in the home stretch. I don't even want to think about how badly he would have been screwed, and I'm quite un-thrilled with the ethics of the folks that claimed they could deliver the app in three months (fairly large-scale backend, and high-quality frontends for mobile clients).
I offered to rewrite the entire thing from scratch for a flat rate 15k and some equity but was turned down. Last I heard they were about 100k in by the time it "launched" and it shuttered maybe 6 months later. So this guy burned 100k but more importantly about 2.5 years of his life on this thing while a bunch of terrible devs and a charlatan CEO made off like bandits.
This is so important if you want to maintain a good relationship. I'm working with a client who has very little money and while the system he wants is almost trivially simple, he's funding it out of his own pocket. After he initially was bouncing from "cool idea" to "cool idea" and had a heart attack at my very reasonable price, I told him to take a step back and write down the most important features and I'd quote that.
He did that, I built it and he loves it. Now he wants version 2 and we're back to the "wouldn't it be great if..." all over again. Sure, it would, but you already said you can't afford all that crap. Now I'm back to the "stop. Think about what you really need, forget the cool IoT features and focus on the basics then get back to me."
Sorry, needed to vent :-)
It's very easy to come up with vague, hand-wavy "big pictures," and a different matter, entirely, to make it happen. Those "details" will kill you.
That's why having not just a technical founder, but one that has experience shipping is important (IMNSHO).
It probably would have been quite different, and I guarantee that they would have come up with some bolierplate crap that they had their offshore devs whip up for next to nothing.
The demographic we're Serving has some very particular needs, they don't have much money (501c3 means nonprofit, if you are not familiar with the designation), but there's tremendous sensitivity in how the data is handled, and also in how the UI is presented. Small features will make (or break) the app.
Long story, and not one I'm particularly interested in sharing, at the moment.
It's all good.
BTW: I'm not working for "cheap." I'm working for free. I'm enjoying it.
Because people dismiss engineers as low-value, until they painfully realize otherwise. It is the same reason Google/Facebook/Stripe did so well compared to other companies -- because Google/Facebook/Stripe realized the strategic value of engineers and compensated them well and aligned with long-term interests. Other companies cut Engineers and constantly squeezed them until they realized (too late) that they had no strategic power left. The stock market over the past two decades is a fantastic A/B test on people strategy and success.
To be realistic, there is one good reason to outsource dev -- it is to very quickly get a demo-able MVP so you can get funding. You have to recognize that the demo-able MVP is most likely throw-away and you have to be ready to re-build from scratch once you get funding for your own team.
We had a technical CTO that really wrangled everyone, but he left not soon after we got bought out, dev has been a shitshow ever since.
- For slightly more legal protection, the code should be in YOUR OWN git repo, not the dev agency's repo
- If you are giving some upfront $ or milestone payment, you should also contractually now own the code up to that point in time
- You should not declare a milestone success (and should not pay) until you can independently compile the app straight from git (front end and backend) (Also, watch out for hard-coded domains where you are secretly pointing to their backend and not to your independently compiled one)
- App QA should ONLY be on the version of the app where you compiled/deployed the full stack yourself
- You should deploy the app into your own cloud to ensure you actually have all the pieces. Super extra credit: Build Terraform/Ansible/Chef into the SoW and final payment should depend on deployment into your own environment by YOU (not the agency)
- You should learn how to build/compile/deploy yourself or hire an independent person (not the devs) who can do this for you
That said, I did present two ideas for those who want to venture into this:
- You recognize that the "success" you have in the working app isnt actually a success and plan accordingly
- You hire someone independent who keeps the third parties honest
Another one:
- You cut corners, get a working demo, raise good VC funds and hire a well-compensated technical co-founder or founding engineer who is compensated sufficiently to be happy short term and has sufficient equity to want long term success
But the whole discussion was what non-technical founders would do, and this is probably the second-best advice I could give. Moreso, to recognize the myriad risks and understand things arent quite as easy as posting a project on Upwork.
The first-best advice I could give is to get a technical co-founder.
The recliner I bought 2 years ago has an iOS app that basically works, but has many flaws. It's clear the company does not have the source code. The developer, in the app store, has a name with Chinese characters and the company is based in the US. It was right after the pandemic, that I bought it, and complained to their support. I was still in the window of returning it for a full refund, so they told me "we'll get right on that" and fix the problem I reports. Almost 2 years later and not a single update to the app.
EDIT: company is Human Touch, chair is the Gravis ZG.
EDIT2: sorry, it was the Copyright message that was in Chinese. https://apps.apple.com/us/app/gravis-chair/id1435036207
Last update Apr 2020.
If someone is paying you, as contracting engineering talent for hire on a consulting/hourly/iteration basis, to develop an app or product they hope will be the foundation of a new business -- chances are high this won't actually work out for them (despite your competence and best efforts), and chances are high they will end up angry at you for taking so much of their money to develop something that didn't end up developing the business they wanted, with possibly legal action to try to claw back some of those funds.
I have some personal observation of this. Even doing work agilely with review every two weeks and the client only paying once they've reviewed and approved the work in that two week period, and approved your work plan for the next two week period, even with all that -- after a year or two they can still threaten or carry out legal action to try to claw back of some or all of the money they've paid you.
So, these can be very dangerous clients. And that you are trying to do your best and give them a quality product -- you aren't trying to exploit them or take advantage of them, you think you were delivering what they asked for (if they asked for the wrong things is that on you? turns out, they may think it is) -- will not necessarily keep you out of these difficulties.
Both times the founders had developed an incredibly negative relationship with their dev shop. Hell, the company with the Series A was withholding payments, the preseed company at least paid their bills.
I naively thought “of course they hate working with a dev shop, the incentives are wrong. I’m FTE with percentage points equity. I’ll fix it.”
Of course, things got better, but growth stalled or never happened, blame gets shifted, suddenly that founder who was excited to hire top tier talent is very disappointed in the very equity and salary expensive engineer you are. You end up being the new target of their animosity. You start to empathize with the folks in India, China, Ukraine or Argentina whose history lingers in the git blame. They’re not stupid, the incentives were just wrong!
The thing is…the CEO who failed to find a technical co-founder, retain them, or replace them with the same equity agreement has already demonstrated their inability to work with technical people. If they are coming from tech, the fact that they couldn’t convince a former colleague to work with them means they’ll be a terrible manager. If they come from finance, as many founders do, you are a line item.
At the end of this, hopefully sooner than later, you’ll quit, you’ll get fired, or you’ll collect paychecks while looking for the next better thing.
As an engineer, stay away from mediocre CEOs.
I kind of disagree here. I have been a manager at F*NG and just below those places in terms of pay, and getting my guys to jump to a startup without market fit, for the pay that those types of places tend to offer, I don't see how they would make the jump. The product/idea would have to be VERY enticing for this to happen, while for me personally, a CTO title would be enticing enough to maybe roll the dice on something.
I check in to see if the other company ever made it anywhere and nothing ever comes up so I guess I wasn't missing out on startup riches.
1) Can they raise money? Proof is good here. Sometimes someone will say "I want you as my co-founder to go and raise my seed round" and you can condition leaving your current job on getting at least some checks in. Remember, this founder _knows_ you can deliver the goods, you are an employed software engineer. Can they?
2) Can they recruit? The process might be a mess but are they treating your time and concerns with respect?
3) Do they view you as an equal partner? Make sure you nail down exactly what they want. If they want a true co-founder, ask for 50%. If they don't, make sure you understand what it means to be an employee to a non-technical founding team.
> Even doing work agilely with review every two weeks and the client only paying once they've reviewed and approved the work in that two week period, and approved your work plan for the next two week period, even with all that -- after a year or two they can still threaten or carry out legal action to try to claw back of some or all of the money they've paid you.
But I would've thought that way of doing things, sounded pretty ironclad. If in every fortnightly review of progress so far, they thought things were going well, how did they end up retroactively changing their mind after a year? Can you go into a little more detail about how things went wrong? Was it a case of 'they were a startup selling waterproof teabags, you built them an online store, turns out there is no market for waterproof teabags, and they were looking for someone to blame'?
In your experience, is it possible to negotiate work at a rate where one would only be working 2d / wk? I'd imagine it's hard to negotiate such an agreement with a company because they want work done on a faster timeline?
But there's a lot of work that isn't your hourly billable that goes into running such a business too, administrative overhead, client relationship management/development, etc.
I personally ultimately decided this kind of consultancy was not work I found rewarding. I also was not one of the owners/principals, and was not there very long, so I'm not really an expert in this kind of business, and probably there are people who might be better to give you advice. But since you asked.
Sometimes a company really does need something yesterday and you're the bottleneck in getting something released/getting revenue/etc. Bit I've also taken on writing and video projects for example that were components of a marketing campaign that was scheduled to launch some months down the road so it was a pretty part-time thing. Mostly I've worked on internal projects but the same principle applies.
With new feature development it would be harder. But you could negotiate a weekly fee based on a 4 day work week, and then get so good and efficient that you do the work in 3 days.
But other kinds of clients include:
* An existing successful business which needs more development or a new project
* An enterprise which needs things for internal use
* Universities, or non-profits
* Government contracting
If you are going to be developing for a software startup, being aware of the risk may help you manage it. Do _you_ think they have a possibly successful business, does it make sense to you? Of course, maybe you can't judge that, it's not like you're in the business of judging startup potential and it's not like that's easy. But does the founder seem to know what they are doing? Again, you may not be able to judge, but if you get a bad feeling it may not be worth it -- or if you get a bad feeling while in the middle, you may want to find a way to fire your client. (Even though it's hard to give up the money).
Will they be the kind of client that wants to tell you exactly what to implement and have you do exactly what they say? Or will it be a partnership where they identify requirements but trust you to work out some details? Either can be risky, but it turns out "we implemented exactly what you told us to implement" isn't always enough to stop them from blaming you for their failure, and I think in some cases can paradoxically make it worse.
A person with this kind of mindset will IMO almost inevitably become at least a little bit technical. Just enough to be dangerous and look silly a bit when they are out of their depth. I have enormous respect for people like that when they dive in into application development with no prior coding experience or can understand complex development ideas because they are truly open and willing and working to understand rather than put artificial barriers before them.
1. Waste time / obsess over small technical details that in the grand scheme of things don't really matter, or at the very least, don't matter until you have validated product market fit. These details can be anything, from the design or shape of a button, or the perfect fully-normalized schema for your database or whatever.
2. You over-engineer technical solutions, like building a homegrown SaaS app or fleshing out a database for something that should have been validated inside of Google Sheets or email.
3. Idea generation - because they are non-technical, they often see potential products where technical people won’t because the technical person overestimates the amount that a non-technical person will commit to solving a problem. If you asked a technical person how to do XYZ, they might say something like, "oh that's easy, just set up a ABC server and VPN into it and run this bash script and blah blah blah". A sharp non-technical founder would immediately sense that to the average person this is absurd, and thus a potential product opportunity. I see this particular bias all the time on Hacker News.
You can't have a person that is an expert in everything. The best you can hope for is to have a person that is an expert in a key area for your business and then intelligent enough to be able to cover for a lot of additional stuff and wise enough to understand and work around his limitations.
For example, if I was non-technical founder but we decided to divide responsibilities so that technical matters are still my area, I would make sure to use whatever technical knowledge I have primarily to hire good technical people and to check their claims.
In a lot of modern startups, software development and business development are two key areas so it makes sense to have two founders, one with technical chops and another understanding business development. But that's not always how things play out in real life.
One thing is that there is a lot of range for "non-technical". We can be talking about non-technical person being able to understand how AI works in principle and what it can or cannot do but not being able to do anything in practice or write a line of code. Or a person that doesn't appreciate programming at all and has not even slightest clue to how computers work.
That doesn’t strictly have to be a technical cofounder but if not that’s a significant degree of trust placed on an early hire.
The question is whether every company requires technical people to run the company just because they need an app to sell their services.
One theory is that in future every company will be a technical company -- because merciless competition will favour companies driven by technical, scientific mindset. But I don't think we are there yet.
If your business is less like that, however, I do think it's critical to find someone you have a high degree of trust will make reasonable calls. Once you start needing things like custom development you're saying that technology is core to your business. That doesn't mean the CEO needs to be a techie any more than the CEO of a restaurant chain needs to be a chef but they definitely need someone whose judgement the CEO respects.
I've seen two types of non-technical founders that stood a chance:
- The industry insider who knows exactly what problem to solve, and who can sell the solution effectively. For example, I saw a woman who had closed $500k of revenue by month 3. She knew everyone in her niche. That kind of product/market fit will gloss over a lot of other problems.
- The hustler who learns enough Rails (or whatever) to glue together a prototype. Here, you're looking at a non-technical founder with basically "boot camp" coding skills. This works best in markets where the basic tech is easy, but the business depends on (say) deal-making abilities. For example, two-sided marketplaces are technically easy, but you need to get two different groups of people to the table.
There are a lot of "non-technical" founders out there who aren't especially good at the non-technical part of their business, either. But non-technical founders who really understand their market and who can act their company's first salesperson? They have options, especially in smaller B2B niches where outsiders don't even know where to start.
I just finished a stint with a bootstrapped startup whose co-founder had decades of experience in the industry and a lot of connections. He has a pre-existing software business in the same industry with modest revenue (<$1mil) that he is trying to use to fund the next giant breakthrough.
His problem is that he completely failed at market research and sincerely believes there are no solutions already in the market, because there weren't when he first had the idea a decade ago. I believed him at first, but the better I came to know the industry the more venture-backed startups I found that were solving the same problem and already had substantial market penetration. Any time I would show him one of these he would insist that our product was so much better that we would blow them away when we reached market.
The same founder also struggles with the concept of an MVP (which seems common for grand-vision CEOs), so nearly three years after I joined they still haven't released the new product. In the meantime, the largest venture-backed alternative has become the standard in the industry. The founder is still convinced that his idea will win out, but I'm glad to be out of there.
At that point, you can re-establish another engagement where things are budgeted for a balance of speed and longevity.
To be fair, there is a purpose for Technical Debt and for cutting corners, esp for MVPs or demos. But it has to be a balance and the cost of the debt carry has to be appreciated.
OP's case is a warning to these folks. He actually brought negative, not zero, value to his startup because he grossly misread the market he was trying to enter. I worked at TripAdvisor for a while on their tours product, and even years ago we were already doing what OP was talking about.
The big problem is that founders have a really hard time understanding just how cheap ideas are, so they sincerely believe that they are bringing 90% of the company's value. They look at the big successes and assume that the process went something like this:
* Founder has an idea
* Founder recruits a bunch of people to build the idea
* Customers come because the idea is so great
* Founder walks away incredibly wealthy
What they never see is the dozens of companies that attempted and failed to execute the exact same idea in the decade before the big success.
1. Deep pockets can mean a non-viable business model can survive longer before going completely bust, simply because the founder can afford to continue shoveling money into the furnace, and build the illusion of success.
2. If the deep pockets are the results of inherited wealth of some sort, many of these founders are just engaging in success laundering where the startup is really a shitty business but its existence implies an alternative story for how their wealth was obtained and gives the prestige of appearing “self made”. Or the founder doesn’t care about the business at all and just wants the title of “entrepreneur”.
3. Often a deep pocketed non-tech founder’s only tool for solving tech problems is money, which doesn’t lead to truly innovative solutions.
A relative of a friend is a Dr. that had a good idea for a useful product and hired a consultant to build it. After about 18 months and a little over $1M had been invested, the consultant wanted more money and I got pulled in to review everything. What I found was:
1. Work was farmed to an offshore team that made terrible technical decisions and were unable to produce working software
2. Consultant and the offshore team took many detours to increase scope and add lots of new, useful features. Of course, they did this before completing existing ones, so the result was a bloated application with about 20 features at the 80% state. Only logging in actually worked.
3. Too much infrastructure too early. High availability, redundant infrastructure up and running at AWS for a cool $10-15k/month. Keep in mind the product hadn't even gotten to MVP and that's also close to the $20k/month my own startup was spending at AWS for a messaging app for full geo-redundancy w/over 2M active users and capable of handling 1B messages/month.
In short, the Dr. got taken for a huge ride. My advice was to make sure that they were able to get their hands on all of the source code and other IP and then wind it all down.
Even if you're a technical founder you should be sceptical about your own idea and putting all your eggs in one basket, and being played by VCs who spread all their eggs over different baskets.
It’s also more difficult these days to be a non-technical founder because hiring technical staff is still challenging despite all the layoffs. I’ve seen them make some really bad hires.
Let's say you're paying $200/hour to a software consultancy -- which isn't as much as it sounds, the engineers doing the work will not be making anything close to HN-bragging-level of take-home at that rate, although they'll be doing okay.
120,000 is 600 hours of work at $200/hour billed. So that might be two engineers working about 8 weeks.
Does two engineers working 8 weeks seem so crazy for developing a novel app, full-stack from back-end to design? Not at all.
Software is expensive.
Which means, sure, there's plenty of money in developing it!
Not that contractors will rip you off charging too much for shoddy work -- although that happens, software is expensive even when it doesn't.
If you are paying a consultancy for the software development, you should probably plan on spending six figures in consultancy invoices to even get an MVP -- if you mean an actually working app by "MVP". That's not a lot at all. So... up to you to figure out how to verify your business model before you do that (with an "MVP" that isn't actually a working app yet perhaps), or have a business plan that accommodates it.
My friend and colleague is non-technical and launched a very successful app. I acted as a virtual CTO and recruiter contract developers. My total hours on the project is <100. While non-technical, my colleague is a professional designer and has domain expertise.
If someone has never gone though that idea->attempted implementation->post mortem loop, it's very likely that they haven't developed a good muscle for coming up with good ideas. They just sit around babying whatever idea is currently in their head, never really challenging it.
(for what it's worth, this idea is something I first encountered in one of interviews in Founders at Work - I just really like the idea)
He's got 200k and he's bled 125k of that just to make his MVP. That's utterly insane to me.
I often like to present things in terms of costs alternatives to my clients. IF it MUST be done with that feature it will cost X dollars to build it that way. If we remove that feature or do this alternative approach we can bring the cost down to Y where Y is much cheaper. It takes a good technical person who is business minded to be able to see these win/win scenarios though. 99% of the time people choose the cheaper option when they find out it can be done for 10K instead of 50K.
Its one of the reasons why you need a good technical cofounder who is ALSO familiar with business strategy to be able to choose from alternatives instead of doing whatever the business guy insists has to be done.
A company I work for just bought another company and I was asked to help them on their feet with their website. It's pretty much a standard Wordpress with a custom theme and maybe 300 lines of custom code in plugins. Their agency billed them north of 50k euros. I can tell they got ripped off because there's just nothing there that could conceivably take anywhere near that much work. I have little insight in the app-making process, so I can't tell if everything is just super complicated or app agencies just say "okay, this should be about 50 hours, let's quote 500 hours in case the client changes their mind on some details".
I'm not sure if it's actually a good idea for a solo, non-technical founder to hire an app shop like that. Too many founders are deluding themselves, and will just lose all their money no matter what they do. But if you're the sort of founder who can get several B2B customers to sign non-binding letters of intent saying, "Yes, we would totally buy X if it actually existed", then those app development costs would be totally reasonable.
I've seen people running organizations of less than 5 people that just need a landing page and a gallery, insist that WordPress cannot possibly address their needs and hire custom web development for $$$.
Those agencies deserve the money they get for all the hassle they put up with IMHO.
I think the best startups are co-founded by a bright technical person and a savvy business partner. The pattern of Apple which was started by the 'Two Steves' (Jobs and Wozniak) can be a really successful one and one that I would like to follow (https://didgets.substack.com/p/looking-for-another-steve-job...)
I have seen so many people who do realize they need a technical partner, but arrive at the table thinking the valuable asset is the idea.
For web app / software businesses for sure. It's worth noting that most entrepreneurs don't sell software. I'm talking by # of businesses, not market cap.
Nontechnical micromanaging founder demands feature goes live by end of day, find another job if you reply with impotent nerd excuses. Tomorrow will be the same, you will not be circling back to clean anything up.
It may be strategically or tactically acquired, but tech debt is fundamentally a business decision.
So, this business failed due to a combination of lack of knowledge of the market and were not addressing a truly burning need for customers.
Why would a scuba shop want to take on the burdens and issues of your tech solution? They are running a shop already. I don’t imagine they planned on becoming billionaires. Maybe they just like scuba and want to facilitate other people enjoying it too.
Telling ann established business owner you have a “better way” to do something is so arrogant. Not everything has to be hyper technologically advanced.
And now that I think about it, I would bet they could've gotten 95+% of the functionality they needed with a Shopify store that cost a few hundred bucks per month and maybe some overseas VAs.
I charged him half for 2 months of work and got the website in front of paying customers. Then $1000 a month for maintenance. He hired other devs after me who dragged him along for a year before he went on to the next team.
Today he has closed shop and got a job.
My other customer was a hairstylist, who put together a wordpress website by dragging and dropping. The website is pathetic, amateurish, sluggish, but damn it makes money. To this day she sends me message like "how can I download the pixel", to which I append another tracking script to the footer, and get paid 50 bucks. She probably paid me around $1500 over the 10 years I've been helping her.
She has zero coding skills, and is as close to computer illiterate as you can be, but she is willing to get her hands dirty. She is about to appear on good morning America again, and I don't think her website will hold... Again.
On a serious note though there is something extremely impressive about someone with no coding experience creating a website that makes them money. Even if they're not coding. It'd be like asking someone who can't cook to open a successful restaurant. If it happens at all it's impressive, but doubly so if you don't even hire a chef you just figure it out as you go along.
No reason for a non-technical person to spend thousands of dollars to build a basic informative website.
This wasn't one of the lessons in the article, but hopefully it was learned: marketplaces are by far the hardest kind of online business to succeed at. The reason is simple: you must satisfy not just one but two entirely different sets of customers: buyers and sellers.
It's not 1 + 1 but more like 2 x 2 thanks to the bootstrapping problem. Buyers will only go where the sellers are, and sellers will only go where the buyers are.
So I kind of disagree with the author about the mote. A successful marketplace has a gigantic moat - its successful bootstrapping phase where the founders accomplish the extremely difficult task of attracting enough buyers and enough sellers to create an actual marketplace.
People starting marketplace as first business are just delusional.
uh, what? without knowing more, and without insulting the author... this is a surprising outcome given the surface facts
Most C level folks I've know are kings of spin.
Related links:
This quote really spoke to me:
> I also learned the level of commitment it takes to bring something from 0 to 1. It's really, really hard to build something from scratch. And it takes an insane amount of irrational confidence.
I've found the same: working at a very early stage startup gave me a new level of appreciation for people who make any new business work, whether it be a deli or a unicorn. It's very, very difficult.
Unfortunately, starting a software business by trying to build too much before shipping is very, very expensive. In my experience, people talk about MVPs as an obvious destination - "in order to prove this out, we obviously need the ability to make payments, the ability to list excursions, ...". In reality, I think finding an MVP is a skill more akin to archaeology: everyone one of those "obvious features" should be scrutinized closely. Is there a way to manually do this? Does the manual version have little enough friction where it will actually allow me to test my business hypothesis?
I also think "building the real thing" is often a trap: "real software" grants you scale but makes it difficult to build a real relationship with your users. At the birth of a business, a close relationship with your users where you can get great qualitative feedback about their problems is far, far more important than scale. Your solution is probably wrong and your understanding of the problem isn't nuanced enough to build the right thing: you can just hope that you're in the ball park enough where people want to help you get a run.
Most college students or just technical friends could of built a prototype for next to nothing. Then you validate the idea.
They skipped to blowing as much as possible, I'm also a bit skeptical of the business model. Did they want to host the classes , etc ?.
Edit: "Building a website, Android app, and iOS app before proving product market fit was like burning money. It took us over a year to get to market, sell something, and get real feedback."
Why. Why would you not just start with a website. Not everything needs to be an app.
Anyway, why isn't the main lesson "not doing a travel business in the middle of a pandemic where we are trying to implement world-wide lockdown for the first time in human history" ?
It's not about having too few or too many features. Nor is it about proving product/market fit. The guy didn't have the technical skills or the hustle to bootstrap a marketplace. Does he even know two-sided marketplaces get bootstrapped with some kind of cheating/trickery/naughtiness? From youtube to linkedin to reddit to quora to airbnb to tinder. They all "cheated" in a specific way that worked for them. And that's no coincidence, because nobody wants to use a social or networked app without other people on it.
What could go wrong?
Add to that not having an original idea and not even willing to test the market-fit beforehand.
Startups are looking everyday more like the stock market: plenty of suckers read y to empty their pocket into a few giants who take all the profit.
I beg to differ.
I worked for a client a few years ago. The company was started by two non-technical guys. They outsourced their product to a freelance web developer.
They told me tales of how that guy was slow to fix problems and how the website went down for extended period of times when he made changes.
And yet, they grew the company because their customers wanted their product.
They first were able to hire their own web developer. From there, they added more employees. Now they have dozens of them and multimillion yearly revenue. They run ads on TV and are recognized nationally as the leader in their field. They are now expanding to other countries.
The problems of this guy were business related, not code related. It's evident from his lesson #1.
How is something done both “months ahead of time” and “last-minute”?
The market is ruthlessly efficient. If something has a low barrier to entry, like his idea, then it's absolutely 100% guaranteed that someone else has tried it. Would-be founders need to do a brutally honest assessment of why they are going to succeed where others have failed.
Most founders of succesful businesses Ive met - especially ones who weren't absolutely outstanding talents in their fields - created businesses with very low barriers to entry yet that no one had tried. But all of them were three-dimensional ones. I get that this is HN so the assumption is tech, but in the offline world or at least the combination of tech with a big dose of offline (bigger than the one in this article) a low entry barrier says just about nothing about potential.
Have a sudden urge to have a nicely planned and well-put together weekend in a new cool place? Too much of a hassle to deal with yourself, maybe, but a whole lot nicer if you can just see what someone has packaged for you.
> Discuss the core business product and idea with a technical person mostly capable of understanding the details it entails. Understand the market, end product you want to envision, and evaluate if there is a fit for it.
But then again, pick any "startups for dummies" book, and it'll explain exactly that.
A technical person should be able to give pointers on stuff you might be missing, and then knowing if there is a market for it... If you don't know, then, what's the point?
For example, "lesson #1" should be met with "<<cybercecurity isn't important for a digital market place>>... What do you mean? Of course it is. Also... what do you mean? Who's the middle man here?".
"Lesson #3": Build an mvp
"Lesson #4": If developing your MVP is 90%-95% development costs, you better know how to do this, or have deep enough pockets to not care.
"Lesson #5". What are you talking about?
"Lesson #6": See lesson 3.
"Lesson #7": See lesson 3, also, talk to potential customers, heck, even before mvp.
"Lesson #8": See lesson 7, i.e. lesson 3.
"Lesson #9": I would argue a founder's job is to establish the business and product to a point where one can evaluate the extent it fits a market that was assumed to exist, then tested to exist, then proved to exist. None of this is necessarily related to sales, or cannot be handled by dedicated sales people.
In any case, kudos for writing a post mortem on this. Most would be too embarrassed by it.
Is it me, or was the biggest mistake simply not asking people to pay for something you can do manually in the beginning? I know creating a marketplace is the fantasy where the flywheel starts and you just collect checks. Until you see people shelling out real cash in real volumes (which you can take manually without anything more than a Stripe account) AND you have a deep understanding of the intricacies of that transaction, isn't it time to hold off building your marketplace?
So many of the comments noted in the article boil down to "launch quickly." If you follow that mantra, you cannot spend a ton of money on marketing, developers, or swag. You just have to ask people for money.
But, asking people for money and hearing no is an ego blow that no one wanting to build a marketplace can handle. Kudos to this person for writing up what they went through, that brutal honesty is powerful and real.
Outsourcing dev as a non-technical founder is extremely difficult to get right.
In their case, people use pen and paper because it doesn't really matter. All the value is getting the people.
- Don't gamble hundreds of thousands of dollars of your own money on unvalidated concepts.
- If a gamble doesn't pay off, don't throw more money into the pit.
Being successful in business is literally about taking small gambles you can afford to lose, and then absolutely milking it when one of them pays off. I've lost money countless times on unvalidated ideas that didn't pan out, but it's always at most single-digit percentages of the company's assets.
Startup bullshit-speak aside, they could have easily earned their "real-world MBA" by following some Wordpress tutorials, spending a couple of hundred on hosting and plugins then shooting the idea in the back of the head 6 months later when they discover that bootstrapping a marketplace is damn near impossible.
There seems to be a huge chasm between people who want to be seen as a cool "Founder/CEO", and people who actually want to start a profitable and valuable business.
To me, the key lesson is a modified version of 4: the founders must be able to build their tech themselves (buying off the shelf products as needed).
They do not have to do it. They can, and often should, get developer help. If founders have the skills to do it themselves, bringing in a developer is buying time. On the founders terms. They can pick the biggest pain they want to outsource at the price they can afford. If they cannot outsource something at a good price or fast enough they can always do it themselves.
If founders do not have those skills, they are buying capability, which puts them at the mercy of someone else when developing a critical piece of technology. This is a huge risk. Life does not always work like this, but if at all possible, startup founders should, giving infinite time, be comfortable developing the technology from A to Z. My 2c.
If we put $200k on the table, in stacks of crisp clean bills, and said "This money is going to found a start-up", then four years later there's nothing left.... that stings.
On the other hand, suppose you (foolishly) frame things like the RIAA/MPAA do, that every lost opportunity is a real financial loss. And suppose you're smart enough to go and work for BigTech pulling in $100k/pa. But instead you take a part time job making $50k. You live on your wits while growing a business. If it doesn't work out after 4 years you still "lost" $200k. But it doesn't feel so bad. We chalk it up to "learning". That's what the University of Life charges for a full time course on Applied Entrepreneurship.
I'm guessing a lot of HN readers are of a similar mind, and I try to see the following your own map lifestyle that way. We all pay a lot for the privilege of creative freedom and opportunity risk.
It's not as if you just went to Vegas and bet it all on black.
When you mention that you had to often walk into like a scuba shop to try to get a sign on, were people more receptive if you 'had an app for that' already?
I expect more and more startups to embrace Flutter, it is easily currently the best solution on the market (for 99% of app ideas). Yes native will always be better, but if you are a startup, your focus should be building an MVP and getting to product-market-fit as fast as possible at the lowest cost.
With Flutter everything just works. I love Dart and the Dart analyser. The documentation is phenomenal and the speed at which I can pump out an app is crazy compared to other solutions.
Don't get me wrong, Flutter has an abundance of its own issues (iOS jank, Flutter web, too many state management solutions) but it still at the end of the day it does the best possible job.
If I have a random app idea which needs to be tested and deployed quickly, I am using Flutter 10 times out of 10.
Personally though, I've found the DX of Flutter far above RN. I always had random packages break on RN that I had to fix every time, while with Flutter most of what you need is already included in the framework, including a component UI library for Android and iOS.
- Most of the restaurants at the time of OT's launch had no internet
- That meant that OT was helping restaurants order and install broadband
- As Gurley point out, this was historically a terrible idea (you are doing hardware installs as part of a software business for an industry with low margins)
- That being said, the network effects made it worth it to do, as PG always says, "things that don't scale in the early days"
- OT also focused on one city at a time
- There are some other interesting points about easy of adoption as the market penetration approached 90% in a city and the sales people went from active selling to essentially just taking orders.
> If you aren't crazy enough to take the plunge, why should they be? Full stop.
Money? As a consultant who helps startups build prototypes (used to, though still I still do from time to time) it was actually mostly people who worked day jobs but dreamed of being their own boss and building out their "crazy idea".
For me, the "risk" the their idea didn't work out and I'd need to go "job hunting" again is baked into the price - the longer you can promise to pay me, the lower my rate could theoretically be (yes, there are other factors, but this was a big lever)
I created https://diffudle.com/ a few months back without knowing what marketing, Idea Validation etc means. Wherever I posted, the overall sentiment was positive but the traffic to the site was still very low. Its peak was 1000 users but generally it hovered around 100 users a day. This is not enough to even sustain itself.
Lately, people told me that the game is not "that fun", I'd be very happy if I got this feedback earlier. How do I derisk this?
At least I coded it myself so saved 200k there :).
Some of the concepts are still relevant though - focus on the core gameplay loop before spending big on artwork, continual private playtesting as early as possible, etc etc. I think most of the success boils down to having a good sense of what’s fun.
As they learned the hard way, there are far cheaper and quicker ways to figure out if a business is viable. Namely, talk to users. Build a landing page and show it to users, or spend a little money on paid ads. Try to get email addresses. Etc
I’ve made bad investments too so I know the feeling of seeing the upside while discounting the risk. But the risks are real, and need to mitigate them as quickly / cheaply as you can even if it means to pass on the idea / deal.
Anyway, it always surprises me that non-technical founders try to enter a field where the are unskilled in the core competencies (software/sales/marketing), then outsource that competency to someone with no vested interest in the outcome of the project. There's a reason tech companies don't outsource the tech, and that's because you want extremely tight integration of decision making and technical knowledge.
Additionally, I'm surprised the marketing spend was so low. An infinitely better plan would have been for one person to build a BE/website that works on mobile, another to sell it to some clients with fun activities, and spend as much money as possible on targeted marketing. That, and not trying to sell a travel application in the middle of the largest travel industry recession since 9/11.
I'd say that most "rules" about starting a business are hot air, because most businesses fail. But:
> Lesson #9: A founder's #1 job is sales.
This is really the critical lesson. Building a business in a vacuum never works. Even if you have to do hardcore R&D and won't have a working product for awhile, working without some kind of interaction and input from customers is just a dead-end.
My key take from the article is the above line. It's hard to build a profitable software company when you are not coding yourself from the start, rather you are a visioneer and lead rented developers on what you want.
What’s the other option for these guys? They’re not generating any of their data. There’s no way to own it unless you own hotel or tour operators which is not likely. Even licensing the data doesn’t qualify as “owning” it for this purpose.
Hard to rationalize the spend though. Blowing all your savings on a business venture is recklessly risky. Buy the home or invest it in solid business/stocks.
Also... It's ok if you can't code and pay someone to do it, but why not learn the absolute minimum in order to be able to implement quick hacks when necessary? It's not like knowing how to code is a generic trait you're born with.
I wonder if being a developer will mitigate some of the issues that come with hiring a dev. You'll be able to see if things are not working or getting off the rails much sooner and pull the plug, change course, or take over.
I am solo founder and invested literally all my money into this mad startup pursuit. There is a difference between loosing $200k with comfortable cushion and spending your last $10k.
If a person is hit by a car, does the car care for the bank account of said person?
If you have the means to "bootsrap it" you should. But here you are seeking someone else to bear all the risk for your sole benefit. It basically means you don't believe in the idea. Put your money where your mouth is.
Since then i only work on business that I could do start to finish
Sales, sales, sales. It's all sales. And when there is feature development, it's because you've sold an improvements to a customer (but make sure they commit first).
Basically this is telling me that I could be making side money building CRUD web apps apps with Flutter!
Didn't see that one coming.
Thank you for the great write up.
-- Russ Hanneman, Silicon Valley (2019)