Ask YC: Should I look for funding? | Hacker News Reader

Ask YC: Should I look for funding?

18 pointswebwright23 comments

Hey all- I've always seen thoughtful responses for the "Ask YC" threads, so I figured I'd give it a whirl.

We've been working on RescueTime.com for about 8 months as a "side project" and have seen a LOT more traction/interest than we expected. We've gotten over 5,000 private beta signups (anywhere from 5 to 60 new ones per day nowadays), a couple of glowing reviews from bloggers who've used our software, and (most importantly) emails from users who are excited/passionate about what we're doing.

We've got a long list of cool things we could do with RescueTime (many of them suggestions from our users) and I'm willing to make the full-time leap. Having sold 2 companies in the past, I'm in the financial position to work on it without compensation (but NOT in the financial position to fund a team). I have partners who are relatively risk averse (and are also very well-compensated for their day jobs). I'm pretty sure we could come to some sort of terms if I wanted to kick it up a notch.

So... Is this enough traction to justify looking for funding? Is the productivity/lifestreaming space big enough to justify investment? Should I try to find a rails hacker to dive in on this full time with me? Or should I go find something else to tinker with and let RescueTime coast as a part-time "hobby" project?

(if anyone has any questions about monetization strategies, team, etc., feel free to ask)

If you let it coast, it will never go anywhere great. Only you can determine if it is a big enough opportunity to be worth pursuing (I draw the line, and VC level investors tend to draw the line, at $100m/year potential...your line may be much lower or higher). I suspect time management can be a pretty big business--particularly if you take your strength in that one niche and then mix it up with related products six months or a year from now (what those related products are is up to you to determine...email-related time management products seems a good place to start groping around, since there is a large and growing population that uses email as their todo list, among other things).

If money will enable you to compete more effectively, then you should raise money. If you're this uncertain about the market size, and how big you think you can be in it, start with a small investment. $50k, $100k, along those lines can be raised pretty painlessly with a good demo and presentation. Your site looks awesome, so if enough of it works to pull together a great demo, then you can raise money. But, if development is what you want, you might want to bring in a co-founder...a great coder costs more than a small investment will buy, but equity in a great idea can buy great developers. You seem quite capable of holding up your end of the bargain, so you should have hackers knocking on your door...just pick the smartest of them, and run this idea up the flagpole. (You might still want to raise money, but not so much for development.)

I think your product is great and that you can make money now. I would suggest marketing it to companies and corporations since they have multiple computers and a desire to understand computer usage.

If you can get some funding I would suggest

1. Create a CD-Rom that you can mail out, similar to the "Free AOL" cd-roms we all used to get. This will make your product tangable and into the hands of companies that are not tech saavy enough to search you out on the web but do want to track computer usage. (who wouldn't want it, I see this as something that any company would want if they knew about it).

2.Here is a mailing list program http://www.completefinancialmarketing.com/-p-284.html so you can reach all of these customers that would never find you otherwise. When I used to fix computers for a living, I meet all sorts of companies that spend a lot of money on IT and the company owners were really non-technical. You can't really reach these people with web marketing but you can directly and from my experiences they would be very open to this type of product.

3. If your program doesn't track multiple computers, that would be really key. I only looked at it briefly. Essentially you would need a master account that can see the stats from multiple accounts. Not really hard, you probably already have that.

The test is how much you want to start a company, not how well something you wrote is doing. Someone who is smart and energetic and wants to start a company very much has a good chance of getting funded with zero lines of code.

>Someone who is smart and energetic and wants to start a company very much has a good chance of getting funded with zero lines of code.

I'm sorry, this doesn't make a whole lot of sense to me. I doubt the average smart and energetic person that posts on news.yc has a significant chance of getting funded with zero lines of code and no users. How would you recommend someone with zero code that passes the "start a company test" secure funding?

While I'm sure some people can raise money without any code, I think it would take a previous relationship with investors or another close connection to angels that invest in web services.

Previous projects can be a good indicator of coding ability. IIRC, there have been companies funded by YC who simply demonstrated that they could hack.

I think Paul Graham may have an uncommon definition of smart. Recall that he has a PhD in Computer Science from Harvard.

I'm talking about YC. Many of the groups we fund haven't written any code yet when they apply to YC.

But since we introduce startups to later stage investors, I guess I am also by transitivity talking about all investors.

What better indicator of desire than the demonstrated performance of your accomplishment?

I agree with your point, for the most part. On the other hand, virtually every investor loves to see some validation of the idea (traction)... It makes it a safer bet.

But the question wasn't about what it takes to get funding... It was-- with the market that we've chosen, with the traction that we have, and with the challenges I wrote about (largely team commitment), is funding something that I should consider pursuing?

It's a difficult road in some ways, but I would suggest finding one or more large customers for version 1.0 and springboarding off of the contract you get to develop for them.

For more details, I would further suggest reading the article at the end of the comment linked to below. If you're interested, I would also recommend listening to the talk mentioned in the reply here:

http://news.ycombinator.com/item?id=19715

Webwright: your product looks great, I signed up using the email address rescuetime &$ kfischer (@ com, can you bump me up the list or post some invite codes here?

I think you have a great idea if you can turn it into a good product. To tell you the fact, I even started work on this idea with a couple of cofounders but things didn't go to far because of commitment levels from them.

This is big business. Go for it full time. However, If you cannot find partners that do not believe in this, find someone else unless you feel they are really important for you to succeed.

What do you need the money for?

Employees, Patents, Legal, Technology?

Marketing?

What sort of conversion rates do you expect with your user base? It looks like right now its a free service, and if 1% convert to paid buyers at 10-50$ a year, thats only a few thousand dollars a year. How big is you're expected market?

Are you planing on selling to the enterprise market? If so do you need cash for insurance, contract liability?

Good question-- Money would go to a development team (1 or 2 coders plus me). I'm a front end guy-- design, html, css, javascript, flash, and some light rails skills.

I'm not too concerned with marketing right now-- though that could chage. I'm a big fan of SEO and SMM (in fact, I just had a speaking engagement on that topic).

In terms of plans-- There are a few ways we could go. Freemium, enterprise/biz/groups functionality, etc. The data is also pretty valuable... If you've ever priced data from Comscore Media Metrix, you'll know that having good data on user behavior is pretty valuable... Of course, this is only valuable if the users are a reasonable cross-section of users. Then again, Alexa does pretty good business having a pretty non-representative sample...

If we go the enterprise route (I'm not eager to go there-- I'd prefer to focus on small/med biz if we create a biz offering), we'd certainly get insurance-- though the rates for professional liability insurance are laughable small when compared to other costs.

@webwright, i guess i do not yet understand what value you have in you're business yet. are you doing this to pay the bills, create a revolution, change the world, pay your future offspring's bills, or just to create something cool?

when i was thinking enterprise, i was not thinking watchdog, big brother, but maybe a personal productivity tool for personal use offered on the enterprise level. its your tool, you can do what you want with it. when i talked to a vc at defcon, she had said that usually you price it at 20$ per user annually for an enterprise micro-app like the ones that many of us YC'ers are/ could be developing. If you sell in volume you might even sell it like zimbra did to yahoo.

as a freemium, i do not think your business is as scalable. what do the yc investors think on here? i would guess if they are going to invest, they are going to use similar rules that someone like sequoia might, and they look for billion dollar companies. what is YC looking for?

have you thought about your exit strategy? are you in it for the long haul, or for a certain amount of wealth?

Oh, forgot to address size of market... This is a tough one. If we stick to the lifehacker market, I think it's big but not limitless.

If we head towards the business-intelligence market (helping team leads and team members understand how they spend their collective time), then there's a pretty large market-- though it's hard to say how many of them would be interested in this... I'm currently exploring this (talking to businesses, etc).

If I was in your place I would finish building a functional and presentable product without funding. I would then go public and see what sort of growth rate I had. Maybe you can attract more bloggers to write about you.

Then, go looking around for angels who have experience selling a product like yours. Use them to fund your marketing. I imagine most of that money would go to a PR firm.

Judging from the product tour on your website, I'd say get some funding and go after the enterprise market.

After reading your bio, I really wanted to meet you. If you're in the Bay Area and want to get lunch sometime, let me know.

I found PG's essay on equity put things in some perspective for me in regards to funding. http://www.paulgraham.com/equity.html

I would find this useful, hopefully you will do a linux version soon. Best of luck,

if you can, get traction first -- your valuation will be much higher; investors pay a lot for momentum.

and start building the team early -- it's unlikely you'll get funded as an individual.

Great logo. Brilliant!

yes, and can I please have an invite. I've been waiting for months

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