Ask HN: Advice on how to best spend $3,000

Chris:

This is hard to write, but I feel as if an honest question deserves an honest answer. You don't have enough money or experience to start this company. You need a much better design for your website and your purchasing decisions to date lack business accumen. Spending $2k on SSDs is not a wise choice, and throwing more money after them is not wise either. You underestimate the amount of money it will take to launch this by at least one order of magnitude, if not two, and you overestimate the willingness of investors to invest in pre-traction startups.

My advice: Take $300 from the $3k and try to make $350 with it. If you fail, try again until you either have $0k left, or a business that makes some sort of bare minimum profit.

If that doesn't sound fun to you, then get a job at a startup and learn as much as you can while you are there.

Sorry for the hard words, I was in your position at some point in my late teens, and I wish someone had told me the realities.

(The good side is that you will eventually make it. Just keep working hard.)

Best of luck.

I want to just second every part of Chris' answer.

As for how to spend that $3k? I'd say work on finding a way to articulate your value proposition well enough so that you can convert customers at a high enough rate compared to what your competitors are making.

Don't try to service these customers at first and just hand whomever makes it through over to another party (taking a few percent in reseller fees.)

It seems like you have a small nugget of a value proposition hidden in your site, which seems to be people who are looking for truly high-performance bare metal servers to rent on demand.

I'm pretty sure that for that specific niche a few people/companies can make decent money by having the best combination of SEO/SEM and well converting marketing copy.

If you want to get this company off the ground you'll have to become one of those few people and consistently beat the few other players bound to be trying to dominate this market.

Testing all this costs almost nothing apart from a few dollars here and there to help test your new design/copy a bit faster.

That is what you'd need to make a successful business out of this. If that doesn't sound like fun to you you're probably interested in something else right now and perhaps you should focus your activities around being able to work on the things that interest you...

Really glad that you added a touch of humanity and compassion to this piece of advice. To the OP (Chris, right?): you will eventually make it. "Keep working hard" is great advice. I'd add "keep your eyes open" and "believe in yourself without ignoring the weaknesses you need to work on". The effort you put into the language on your website speaks for itself: you've spent a lot of time and effort on this. But it's not clear what your value proposition is and you're at risk of making a bunch of decisions that will lose you your $3,000. I don't normally recommend the lean startup, but for you I'd strongly recommend picking up that book at a library or bookstore and really internalizing the messages in there. If you decide to continue with your venture, then you need to get out of the building. If you decide to put it on hold for a while, join another startup with a founder you admire and watch her every move. Good luck.

"You don't have enough money or experience to start this company."

Agree. Put another way the saying "you have to walk before you can run" (or is it "putting the cart before the horse".)

While it is fine to ask questions you also have to narrow down the questions that you ask and show that you are willing to put the time in (as others have) to figure it all out using already available information.

I'm reminded of many years ago when a friend wanted me to simply tell him how to start a similar business to the one I was successful at (non tech business). I was willing to fill in gaps in his knowledge of course but I wasn't willing to give him a play by play of things that took me years and years of trial and error to learn or to be his "help desk".

Here's the plan...

Pretend you invested $3k in servers and SSDs. Add these services to your site, and try to find your first customer. The bad news, you'll never find them. The good news, it didn't cost you a penny.

I said something in another thread of his; he posts stuff like this all the time. He has some posts that really SCREAM amateur.

I recently blew a 6 figure inheritance on a startup which failed due to medical problems http://www.techcofounder.com/ads/view_ad.php?id=769

As a customer, that would concern me, especially when it's a one man show. As a business owner, I wouldn't touch it with a 10 foot pole. You would be more of a liability than anything.

If I were in his position, I'd prove the concept by reselling DigitalOcean. They do low cost SSD VPS. That way it won't cost 5k just to see it flop (or not)

Apparently based on people I've talked to who are familiar with the tech startup scene, there aren't any dedicated server providers specifically targeting the tech startup market

You mean B2B? There are thousands of them. I am having trouble thinking of a webhost that doesn't target the tech startup market. Geocities or Angelfire maybe?

In fact, MediaTemple gives free hosting to a lot of tech startups in exchange for their logo appearing in the footer.

I don't know what to say really. There seems to be a huge disconnect from reality. Probably not anymore than most teenagers, if that makes you feel better.

Apparently he's around 39 years old, as he was born in 1974 http://www.techcofounder.com/ads/view_ad.php?id=769

"I have extensive experience working with high-end clientele ...For example, I met Calvin Klein on a job I did for him at his penthouse in New York's west side one day."

This says it all really.

You don't know what you're doing and don't have enough capitalization to try any of this.

You're also trying a oft-repeated dream in starting a web hosting company. It's the same story since the 90's, and that ship has already sailed when costs plummeted and there went your margins.

Worse, this time around you're caught in a position where everyone is making expensive investments into SSD infrastructure by factors of millions.

Your rack of few SSD raid arrays is not in anyway, shape, or form on the same level of competing with anyone else offering the same product at your intended price range.

Sell all your hardware and recoup your money and try something else.

Or if you wish to persist...

1. Sell all your hardware to recoup costs.

2. Sign a leasing contract with an established hosting company.

3. Buy a control panel software for $500.

4. Hire a designer for $1500 to create logo, webpage, email templates, ads, and marketing material.

5. Spend everything else on targeted Facebook ads.

Good luck.

You're right about most of what you said, except a few things.

Do not hire a designer for $1,500. It sounds like you don't have much money to get started, and you're going to need every penny in reserve for problems. You need to be doing those things yourself, despite the time and effort it will take.

Don't spend a single dime on Facebook ads, or any other ads. Set up an account on WebhostingTalk.com and spend hours there every day, with your information in the footer of every post you make. Also consider posting to the deals section to get your first customers, to the extent you can afford to. By virtualizing your dedicated host, you'll have a guaranteed margin, erode that to provide deals.

Front as little money as absolutely necessary. Do not set up a new box with your provider until you get an order from a customer.

Once you have enough customers and are making a little money, you can begin messing around with custom hardware hosted in whatever situation you think is ideal.

You're not a real web hosting company, and you can't afford to be for a while yet. You're a customer service layer that rides on another hosting company, you differentiate yourself by being extremely hands on. Then when the time is right, you can try fronting the capital needed to begin your own host.

My biggest question is: who wants this? Do you have a list of potential customers already? Can you sell your half-rack of capacity if you get funding?

The website you linked to is, frankly, not slick enough or trendy enough to attract the HN crowd to rent your servers. It doesn't clearly define why I should pick you over DigitalOcean, Linode or even Amazon. I can understand that you're probably focused on 'shipping' by building out the platform, but I think you should work on validating the idea as well. I would use whatever funding you have to commission a proper landing page that explains a few key points and captures email addresses. Even better, go out and talk to people and explain why your project is new, exciting and better. See if they also think it's new, exciting and better. If not, iterate and repeat.

Basically, rather than stressing about whether to buy MLC or SLC, collect customers who are concerned about performance first. Then find out what they're looking for: is it really SSDs, or is it a better core/memory ratio, or it reliable networking (that last one is highly likely, I've never seen anyone who's happy with their VPS networking). The best part about this plan it, besides paying for the website (which shouldn't be more than 500 bucks), you don't need to sink any more money in right now. Just time.

To provide some more context, here are previous questions from this poster

Ask HN: What workloads would this VPS config be good for? https://news.ycombinator.com/item?id=5592790

Ask HN: How do you keep your servers/sites safe from hackers? https://news.ycombinator.com/item?id=5739713

Ask HN: Would any web devs like to co-found this startup with me? https://news.ycombinator.com/item?id=5764168

Ask HN: What are the specs on the dedicated servers/VPS' you rent for dev work? https://news.ycombinator.com/item?id=5772439

Ask HN: Help me price my product. What's the most you would pay for this? https://news.ycombinator.com/item?id=5776554

smartwater's post on the last one is interesting.

I have to ask; why are you building a hosting company? Did you identify some unfulfilled need in the market? Have you identified and cultivated your early customers?

If you don't have answers to these questions I strongly recommend not spending anything until you do. You're risking burning through all your capital before you have an idea of what you're marketing or who you're marketing to.

Also, you're drastically underestimating the costs and complexities of starting a hosting company. You could easily burn through thousands of dollars before you make anything.

From his post on a co-founder dating type site:

    Apparently based on people I've talked to who are familiar with the 
    tech startup scene, there aren't ant dedicated server providers specifically 
    targeting the tech startup market, and if I were to enter the field,
    I'd be the only player there

Seems he thinks he has identified an unserviced market (unfortunately, it's not accurate...)

surely, this child has never heard about heroku.

I hope this isn't too harsh, but your website is probably the most untrustworthy, low quality website I have seen in a long, long, LONG, time.

You couldn't even give me PAY me $1000/month to use your hosting, that's how sketchy it looks. No joke.

I think that's an honest and fair comment. My websites are important to me - I need to know I can trust a host to look after them.

I'd spend the money on a design and a marketer - you need to get the message right.

You could start by spending $50-$100 on a nice WordPress theme to slap on the front end. Spend money on a designer when you've got some initial paying customers.

True dat, theres already like a million hosting themes online... http://themeforest.net/search?utf8=%E2%9C%93&term=hosting

Probably the best use of money on an extreme budget, is finding a good one and then modifying it.

It wouldn't even take that - you can go a long way in a few days making a child theme of twentytwelve and tweaking the stylesheets. Nearly everything else is plugins.

I'd recommend not buying anything and only leasing servers from someone else to start. You'll save a ton of money and its not as big of a deal if you don't succeed. You also forgot the cost of business insurance, support infrastructure and I suspect you'll spend a LOT more building an api/portal than $1500...

Chris, please don't take this comment as being mean-spirited, but I'm not sure you are getting the message from what the other posters are saying. I think it needs to be spelled out candidly:

This isn't a viable business.

From this and your previous posts it is clear that you don't have the knowledge required to run a hosting company, you don't have a target market, and you don't nearly enough money. You're off by at least a factor of 10, if not closer to 50. No-one wants to rent a server from a one-man-and-a-machine company.

Please read over the various comments from your past submissions and be honest about what you read before you continue.

1. You dont need to buy servers. You can resell them from other providers like Leaseweb, OVH, Softlayer. They will give you bigger discount with every new client. And then you be big company, you will start to do your own servers.

You will save time on managing server, money on bad hardware etc..

2. Make good website. Really good, current looks like crap.

3. You can use WHMCS for managing billing and servers, VPS, etc.. it will be enough in the beginning. Monthly license only cost 18$/month, and lifetime 350$

I agree with GBiT. I'll add you can bootstrap with free software:

isp config: http://www.ispconfig.org/

gnucash for accounting: http://gnucash.org/

sugar CRM: http://www.sugarcrm.com/

Icinga for monitoring: https://www.icinga.org/

Pick your fonts and colors: http://colorschemedesigner.com/

and a logo: http://www.logogenerator.com/logo_draft.php

From my +10 years experience in the hosting industry, I'd say in this case the best way to spend the $3,000 is to buy Xbox One and some other cool gadgets.

Anyone else getting troll vibes here?

This is all so bad it's like a parody of the companies we've all seen or heard about.

Yes... after seeing $4000 for a logo, I think this is too much of a trainwreck to be true. Then I see past posts by him and it seems it's very real.

Too many old, related, Ask HN posts from OP for this to be a joke.

That, or it's the most well-planned troll I've seen in a long time.

Chris,

it seems like you are a do-er, which is fantastic, as most people have the other problem of having ideas, and not acting on them.

but you seem to be approaching this w/o sufficient knowledge/experience in business development aka, "theory stuffs".

I highly recommend http://www.mixergy.com to get a well rounded opinions, and anecdotes on startups to get a better feel for the types of things you need to be aware of before/after launching.

keep at it, best of luck.

p.s) http://www.bothsidesofthetable.com/

http://www.gabrielweinberg.com/blog/

http://paulgraham.com/articles.html

also fantastic places to checkout

+1 on Mixergy! There's lots of case studies on marketing, building a customer list, customer support etc. etc.

> which will eventually be upgraded to a much faster 6GB/s storage subsystem once there are enough earnings that we can reinvest revenue in hardware upgrades.

You may have customers who are evaluating your service because you offer SSD RAIDs. They know what the alternatives cost. They know what it costs to build it themselves. You've just told them exactly how little money your business has.

You're letting it show that you're just some guy with some servers in a colocation somewhere, hoping to rent them out. Why should any customer choose you, instead of the competition?

You appear to be using the logo form of Sparkasse, a relatively large German bank.

http://www.sparkasse.de

That logo design came from a Crowdspring contest where I paid over $4,000 for a package of designs. There was no way I could've known it was lifted from their design.

Thanks for bringing it to my attention. I'll contact Crowdspring & let them know- maybe I can get my $4,000 back.

You paid over $4k for a logo and you don't know what to do with $3k? Oh boy.. I'd say spend them all on a bullish equity and get a good ol' day job

Next time use 99designs.com/.

$4k for a logo to put on a website that looks like that? I hope this thread makes a fantastic case study for others. There are small businesses out there that are generating revenue, making profits, and wouldn't blow that money on a logo. This should have come in later when improving your brand image as part of some marketing initiative.

The logo is arguably the least important part of your business, especially in terms of prioritizing the sequence of necessary investments. You should not be spending so much money on design this early.

I must ask..What do you do for a living?I mean, in all honesty, you look like a gardener trying to build a spaceship. You have no idea what you're doing.If it was a contest how come you paid for the package?

The logo is not equal. I think that it was not copied. Your logo has rounded sides, but the bank's logo has vertical sides with rounded corners. Maybe it was only an honest similar design based on the letter S. Anyway it's too similar and it can make the bank's layers unhappy. (But in this moment, the logo is not your biggest problem.)

Our entire cash outlay, pre-revenue, not including founders time, was about £1,000. We bought a VM, a domain name, a copy of Flash to build an little interactive game our domain required and paid some admin fees on content we acquired.

We made up our first logo, 10 minutes in Photoshop—it was as ugly as sin but it didn't matter.

We lived with a VM because there was going to be no load on our servers until we had traffic.

The really expensive bit was the time me and my co-founder put in. To a degree, if you don't factor lifestyle (and you should), we're still recouping that.

Considering the simplicity and mostly just an "S" I'd have to see almost exactly the same logo to think it's infringement. These logos are not so similar.

The ones who are really looking for super speedy servers are not going to signup with unknown, just created new company.

And you cannot beat run of the mill Go Daddies and Hostgators and Bluehosts with their prices. UNLESS you offer something really unique, value-added that others does not have.

Chris....

Lots of people have weighed in on this thread with some wonderful advice. I encourage you to heed all of the cautions!

I have little new to add, but I want to give you some compliments. Most people dream big dreams and never do anything to reach them. You, on the other hand, dreamed a big dream and are clearly working your tail off to achieve it. That alone is admirable. Add in the fact that you either saved up some money to invest in your business, or you've found an investor, and you've clearly got a whole lot of good going on.

This might not be the right startup for you, but I respect and admire your drive. Keep at it, mate - you have an immense amount of potential and I'll be cheering for you.

Do you want to run a business? Or specifically this business?

Are you a good programmer, but a terrible designer or something?

You're probably better off running freelance/I.T Service business then attempting this. It won't require any massive capital requirements.

Customers should be funding your hardware purchases. If you don't have customers yet then go find some and get enough of them to prepay and agree to use your service so that you can afford the hardware, etc. Because, if you're not able to build a list of customers that will prepay then this business is in trouble. Better to get yourself into that "sales mode" sooner rather than later. Since the margin for error isn't great ($3k) you definitely want to focus on getting customers first and leasing servers as the other commenter suggested.

As others have noted, there is a lot wrong with these plans. I just want to focus on one point here -

Regarding the $1,017 for incorporation via LLC. You can incorporate for a lot less than that. See: Legalzoom.com

Keep in mind that will immediately add overhead costs and a little time consumption to maintaining the company / keeping it in good legal standing. It might be worth doing because of the bit of a liability shield you will acquire with it. Personally, I'd go as far as possible without spending that money (maybe at least until you have a few customers).

You're entering an incredibly competitive market with a small budget (and very expensive costs). If I were you, I would spend as much time as you can learning from the forums at webhostingtalk.com and trying to sell to that crowd first. They will quickly tell you if your product fits a niche.

forget about the $3k you have left, what about the money you've already put in? it doesn't look like I can sign up anywhere to get any sort of service, so you have no way to generate a return on your investment so far -- so why would you want to put any more in?

my suggestion is to set up yourself a prgmr-like website, do the administration yourself (by hand), and spend a few hundred dollars trying to get some traffic and signups. if that starts to work out then take it from there. realize that more SSDs aren't going to generate any money; signups will.

a new website would be nice, but you don't have the money for one, and it's not clear it's worth trying to get one at this point. the pure ASCII look could actually instill some sort of confidence that your current website does not.

good luck!

If I were you, I would use your $3000 to continue to invest in the time machine you have invented. Or, at least, I assume you have invented, because it looks like you went all the way back to 1994 for your website.

Why not just use something like Weebly or Strikingly to create a website that doesn't look horrible. That'll save you 1500 for now, then when you can get a customized look later on.

Would you consider spending half of it on a 2 week vacation somewhere exotic? :)

If it makes you happy and energized after, it might be even more helpful than the infusion of cash...

For $3k you can have a pretty rockin' boat party.

Hei, you can contact me to get a good design. Mail me folkgraphein@gmail.com, all I provide via oDesk.com

Zaman

This guy is a moron or a troll... Why are you replying to him. He said he spent 4k on the logo, no way someone can be that stupid

I know a man who spent 10s of thousands on google ad campaigns -- for his bee removal start-up. He was convinced if he was in top three ads customers would come pouring in. They didn't because he had no real marketing plan.

Yea even that makes more sense than 4k on a logo that looks like that.

Come on I'm all for people doing their ideas but this is a joke. Read his other comments/posts before down voting me whoever did, guy has no clue what he is doing. Pretty much its like picking a random person on the street and then picking a random idea for them to do.

maybe just flush it down the toilet, save time