The 2013 Startup | Hacker News Reader

The 2013 Startup

nickchirls.com

98 pointsphiltoronto26 comments

I'm stoked to read these opening phrases:

"...The founding team is very small, often one technical person. In some cases ... hacking something together because she needs this thing to exist ... They are slowly and deliberately building small communities or early customers. Some are even making money. In fact, a few of these startups are profitable (in the ramen sense)."

...because they read exactly like a case-study for what I've been experiencing with my project[0] over the past 12 months, and have found very hard to explain to people.

It's really nice to have a rosy outlook beyond "Hey that's neat, now you can go do a real startup!"

[0] Open Exchange Rates (https://openexchangerates.org)

Another "2013 start up" guy here on the march towards a first public release and it really does read like a case-study. He's beautifully articulated the philosophy I've adopted to get from light bulb moment to something real and the resulting experiences over the last year.

Also, congrats on openexchangerates.org ! Idea's great and deliciously simple, the site is lovely and the API looks snappy and clean. By sheer serendipity my project has a major requirement for exchange rate data so I'll be getting my hands dirty with your API now I know you exist :)

That sounds awesome, best of luck with the release. And cheers for the complements, hope you enjoy using it!

raises hand me too. I'm way too honest to call what I'm doing "a startup." But I am spending my own money on it, and I am working on it exclusively.

The article makes the point but it should be re-emphasized: the tools a capable individual has at their disposal now to build software is, for lack of a better way to describe it, completely insane. I'm revisiting AWS's offerings as a solo person now after working for a larger company for a few years and it's mindblowing what's there. And then there's stuff like github, mixpanel, new relic, and so on, all of which offer starting tiers that are free or absurdly cheap. I can buy tools to do design work in the App Store today for tens of dollars which just a few short years ago would have required a sales call and a 4-figure purchase order.

Having done a "real startup" three years ago I look around now and realize a lot of the hard operational stuff I was wrangling with back then has basically been commoditized and can be paid for as a service that scales linearly up with profits. It's nuts.

My focus is this: take advantage of this massive leverage to get as many experiments going as fast as I can. Invest the time to build domain specific components (not devops crap that I can now pay for) so that I can quickly create a series of products/experiments around a similar theme quickly while I try to find something that clicks. Keep costs low and charge for the product, keeping a close eye on operating margins. (People paying for something is the strongest signal that you've found something interesting, after all.)

We have been doing this for years and have bootstrapped all of our B2B startups (SaaS products). We have had VC's contact us and turn them away because it is not a good fit. We haven't fallen within the "ramen sense" profitability in a very long time and are comfortably profitable with employees. We simply keep re-investing profits from successful products into new products and over the years have been able to acquire hundreds of thousands of users. We are at a point where we are able to leverage our current user database for new product launches, feedback and ideas. Bootstrapping forces us to think about profits and launch products that our existing customers and new users will pay for. It gives us no choice. I would like to see more tech startups consider bootstrapping. I think too many read Techcrunch and hear about the very few that make or have been acquired for millions and have VC backing but don't look at the thousands that die off. I have always looked at it as wanting to build and grow a successful business that is around for a long time.

We're doing the bootstrapped / self-funded approach as well. It is frustrating sometimes, to look around at some of the opportunities that we can't pursue due to lack of resources, but so far I don't see a big need to go and jump on the "institutional capital merry go round".

On a somewhat ironic note, however, we recently applied for an NC IDEA grant[1], and didn't get accepted... one of the reasons cited in the feedback letter was something like "concerned about the commitment of the founders as they have only invested ~$5,000 to date". Um, hello... we hadn't needed more cash up to that point. It's just the two of us sitting in our homes, or coffee shops, writing code on our laptops. All the expenses we have had so far were basically: 4 Slicehost slices for various purposes (a demo server, our wiki, SugarCRM, website, etc.), a paid Github account for code, and a little bit of printing and random stuff.

So, somehow, the fact that we've run lean and been very capital efficient so far, is seen as a negative. I don't know whether to laugh or cry.

[1]: http://www.ncidea.org/content/grant+program/956

Perhaps you should modify the way you're accounting for your cashflow : Show that all the P&L gets dividended out, and that you then put it all back in the business. That way will show far more than $5,000 commitment on your parts. (They don't have to be literal dividends, just internal allocations to the partners, and an internal reinvestment).

Yes! Great advice!

Don't let that discourage you. $5k is the average we invest on a new product launch (not including our time of course). We do however re-invest most of the sales right back into it for the first year. This approach has allowed us to grow multiple products to a very nice monthly profit within the first year. We always focus on releasing things our customers and target users will pay for though otherwise we would never be able to keep funding it.

This is my company Drifty (http://drifty.co/). We make make HTML5 dev tools Codiqa and Jetstrap.

In 2012 my best friend and I bootstrapped the company while working full time (we just charged for our products). We made enough to go full time later that year and we employ one person and are hiring more.

We are actually in TechStars right now (score one for great value-add seed investors), but we are saying "no" to extra money beyond that. Why? We think bootstrapping it fits who we are and what we want this company to become.

Does that mean we are a "lifestyle" business? I don't see it that way. We are still insanely motivated and have high aspirations for this company, but we don't think throwing tons of cash in it will have the best result for us, our happiness, our customers, or our long-term sustainability.

We go back and forth every day about raising, but we have a lot of support not to right now, so we'll see what happens.

Great to see you and other companies head in this direction. If you have revenue early enough it's a game changer. Glad TechStars is supporting you in this decision.

My limited experience says this is right on.

One of my best friends has been working on a startup for about two years now, focused on a B2B vertical where he has experience. It's gone well, and he's gained a handful of customers who are all very loyal to his product.

He's turned down outside investment the whole time, because he didn't have a growth strategy that required capital. He saw investment as a liability, taking a portion of his flexibility and tying him to a strategy he hadn't yet tested.

Now, he's looking for funding to grow quickly, and to hire some marketing folk. Ironically, while he had people asking to invest a few months ago, now he's having trouble finding the right fit. He's heard "you're just a little bigger than the companies we normally deal with" from every corner.

I know he's not alone in this. I hope the startup world quickly adapts to this change, and develops a facility to deal with tiny bootstrapped companies that are past the "I have an idea!" stage, but need outside expertise and a workable plan to scale.

Another viewpoint : The investors that had previously wanted to invest are used to being the ones with the upper hand. Now he has a lot more negotiating power, and that doesn't suit them at all. And that should be a lesson for people that raise money early too.

I bootstrapped my first company the whole way and sitting here today wouldn't have changed it. It forced us to be smarter and work harder. We also had more time to figure it all out with little pressure.

Now the second time around (Stackify) it is nice to be self funded. But its easy to spend money on things that aren't always necessary. Definitely not optimizing the cash as much.

As an angel investor I prefer smaller companies who slowly figure it out and get some traction before raising money. So many people raise money to experiment if it will even work.

Very interesting. I feel that I'm part of this cohort (unexpectantly) since recently launching startuprocketlauncher.com in 2013 ... essentially starting making $$ after day 2 and receiving tons of signups from little marketing efforts. I'm not necessarily say NO to investors but since I can market, develop and acquire users myself with a bit of profit, I prefer to work at a pace I'm comfortable with. Its best I believe to experiment without any pressure and development the business model creatively to a point where, if needed, investors can jump onboard with something less risky with a thriving community to take it to the next level.

Anyone else get the sense that this article is, intentionally or not, a huge ringing endorsement of the YC model?

I.e. much more focus on providing super early-stage startups with guidance, emotional support, and the world's best network while providing the bare minimum of capital up front (avg $17,000) to keep founders lean and mean.

My only gripe with YC is that despite how successful they've been and how many copycats they've inspired, there is still a huge drop-off in quality outside of YC, and yet pg and friends seem to have no plans whatsoever for any kind of domestic or international expansion, which is a shame.

I don't look at it that way. It seems YC is interested in pushing early seed stage companies to raise a big next round and become a "large, venture-backed company" (from our interview rejection earlier this spring).

This "2013 startup" is something different: focus on customers and revenue instead of just raw users, and go from there. At least that's my interpretation of the concept.

I'd agree with this. YC is a wonderful program for both startups and entrepreneurs, PG is a godsend for these groups, especially in past years when seed funding was harder to come by. However, a lot of the hype now around YC often pushes entrepreneurs to raise way larger seed rounds than they need or know what to do with. This is of course not always the case, and I can think of several YC companies off the top of my head that did not go this route (even when there was investor demand for it), but on balance, YC seems to encourage founders to raise way more capital than these companies need in the early stages. Again, I think entrepreneurs are now waking up to some of the negative consequences that can result.

I hope this is the case.

Any founders feel they fit this bill in NYC? If so, would like to meet with you and talk shop. We're almost at 60K users on a "project".

Email is dmitri [at] backspac.es

How do you define seed investor here? Most people need some sort of startup capital beyond the accelerator, as most companies don't get to profitability quickly enough. Also, I think this ignores B2B cases where you can't so easily build a highly stripped down product, but need to hit some quality threshold for businesses to pay. And that takes time.

Indeed, I'm defining seed investor largely in the context of a "seed round"...which these days seems to be anywhere btwn 500k - 1.2M. There are some 2013 startups that take a bit of friends and family money to pay for rent / food, and this largely comes down to the founder's personal / financial situation. Also yes, many of the cases I'm thinking of here are consumer focused companies.

That kudos thing is so much fun.

For the sake of argument, how is this different from self funding? Ramen profitable isn't profitable, and not taking seed is just preventing you from paying yourself.

As i see it, it is self funding. And the "no" is actually a "not yet". As the author puts it, is a problem to seed investors, because now the founders themselves have the money to their own seed. And nothing has changed to VC capital.

I don't see it as a "2013 trend", it is something that only depends if the founder have a cash reserve or not. I don't think there were many founders seeking seed capital in the past out of absolute need. Not in the past, not now. Maybe these days we have more people saving money with the clear purpose of self-fund for a year or two. Maybe is anedoctal.

Yes, the point is that in most cases, at some point these companies will raise institutional VC. But whereas in the past couple years, I've seen founders blindly take seed capital (in some cases very large amounts) because the market offered it, I see founders now thinking more thoughtfully on sizing and whether to take it at all until they can show real growth. Once they can show that, they can make a better and more educated decision to hop on the VC treadmill or not. Mainly the point is that I'm seeing more mature founders question the funding environment and realize some of the negative implications of overfunding at the seed stage...

like the point of view. Will be interesting to see if some prominent founders say "no" like some said no to large but not large enough acquisitions in the past.

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