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Comment by ivankirigin | Hacker News Reader

We weren't ramen profitable. We ran out of money and didn't have a good environment or case for raising more.

I've been following you guys for a bit and wonder did you guys really spend over $1m since inception? (http://www.techcrunch.com/2008/09/24/tipjoy-raises-1-million...)

We were advised (in retrospect incorrectly) to be ambiguous and say "raised under $1M" when the amount we raised was actually much less. Our burn rate was slightly higher than most poor grad students, but not _that_ high.

  We were advised (in retrospect incorrectly) to be ambiguous
  and say "raised under $1M" when the amount we raised was
  actually much less.

Advised?! By whom.

YC?

I could be wrong, but that doesn't sound like the type of thing YC would advise...

No, not YC. This issue isn't that important. If investors don't like the way we spent their money, that matters. Confusion on a blog doesn't matter.

You sound surprised but this is extremely common in smaller deals IME.

   The company hasn’t disclosed the exact amount of the funding, but says that it is just shy of $1 million.

that doesn't exactly say under $1 million, its written more like 800-900K

Only by the word "just" which could easily have been inserted by mistake.

"How much did you raise?"

"It's, um, shy of one million dollars."

Reporter writes "Am't raised: just shy of $1M" in notes.

What a strange advice!

You should never play for 'perception', after all, everybody that it matters to will have full disclosure anyway and you set yourself up for being called out at some point in the future.

Just say it like it is. I notice that you're still not coming clean about how much you in fact did raise. You're under no obligation to say it but the way it stands right now it could be $100K or it could be $999,999.

If somebody misquotes you that is not your problem, if the press embellishes your story, well, that's what the press does more often than not. But if you purposefully engage in the spreading of false (or suggestive) information then that does not really help.

"if you purposefully engage in the spreading of false [...] information then [...]" you must be marketing something

Sorry to hear about the shutdown. FWIW, I'm impressed how open you're being, about profitability as well as money-raised (http://news.ycombinator.com/item?id=777010).

Btw, apparently you have a decent amount of traffic (http://siteanalytics.compete.com/tipjoy.com/). Is the problem that very few of your visitors convert to tippers?

Compete measures iframe includes or javascript widgets - meaning our widgets on 3rd party sites. That traffic is roughly correct in direction, but totally wrong for the volume to tipjoy.com itself. But that doesn't really matter, because it is a service - one usable almost entirely without visiting tipjoy.com.

The twitter integration, for example, is completely unmeasured by compete.

Finally, traffic is a poor metric for a payments site. Transaction volume is what matters.

Ohh, and I'm not being that open. If we were profitable, we wouldn't be shutting down.

Transaction volume is what matters

Feel free to smack me if I'm prying, but I'd be fascinated to know a rough ballpark for what transaction volume was.

Thanks for being so open and honest about the whole thing.

You said, if you were profitable, you wouldn't be shutting down. But if you think there should be a way to make social payments work then don't you think its just a matter of time when you would be profitable.

I mean minimum profitability also doesn't really justify what is called in other posts the 'opportunity cost', but if you are working on something big and still believe there is customer value then profitability will come eventually.

And if that belief is still there then maybe just buckle down for sometime in a paying gig and then go back again. It might take your mind of it for sometime which might actually give you some good insights on how to take it ahead.

I though, still understand that there could be other personal reasons for you to do this, in which case please feel free to not respond.

Thanks again for the post and best of luck for the future.

If sounds like they would need new funds now though, not way off into the future where they could hit profitability. The interest in another round of funding would probably be low for a company that has chewed through a sizable chunk of funding and so far not produced the results they were hoping for.

We didn't want to do Tipjoy as a side project. Like I mentioned in other threads, payments isn't something to do lightly. Any contracting that would pay the bills wouldn't leave enough time to work on Tipjoy.

I didnt really mean it as a side project. I understand it won't work that way. Just keep it on the side till you are able to raise more funds, or organize from other sources (job,consulting etc.) to give you a decent runway.

Is the problem that very few of your visitors convert to tippers?

Assume, for the sake of argument, that the highest number on that graph is accurate and sustainable. Even if it were, it is well below the level the business needs, because you need truly massive scale to make a living solely on transaction costs.

350k visitors * 1% conversion (+) * < $1 in transaction fees = < $3,500 in gross revenue. Now, deduct the cut of the CC interchange fees. Uh oh.

+ Where a conversion actually means cash money exchanged hands. I remember there being some notion of promises/pledges which could be swapped around without actually generating an exchange of cash money. Promises are lovely things but they demonstrate interest a lot less readily than observable flows of cash money (since they're cheap and ephemeral, presumably why the system was instituted) and it is difficult to spend your 1% cut of the value of a promise.

Agreed. I was just hoping to get actual info on:

- Conversions from 'visitors' to pledgers

- Conversions from pledgers to payers

- Avg monthly payment (volume of tips) per payer

(Btw, doesn't Compete often underestimate by a factor of 2 or so?)

We took 3% on top of any fees. The business model is pretty easy. If you need $N K per month, you need N/0.03 monthly transaction volume to break even.

I wish we had more time to make things like http://tatatweet.com, but better. We'd take 100% of the transaction volume, and help the twitter app market grow. I'll certainly build things in my spare time for that market.

Just out of curiosity: Are you dissolving the corporation (and YC involvement) or are you continuing with YC involvement for a future venture?

I'd love to give YC advisory shares in a future startup. We're eventually dissolving the corporation, but need to handle cash out properly.

Give, or sell, shares? I am just wondering if you consider YC involvement so valuable that you would actually hand over shares just to have them on board in a venture.

thats quite common for advisary board positions (usually < 1%)

It's surprising isn't it? that's the same amount you'd give an early engineer. Makes it sound like advisory board positions add an equal amount of value.

That entirely depends on how early, right? Advisers can definitely be worth more than a single engineer.

Yep, I think my big trouble is 'can' and 'will'. An engineer, being a full-time employee will come in and kick all sorts of ass, while an advisor may or may not help you make the right decision, make the right connections, etc.

Not saying that it isn't good to give your advisors equity but just wondering if you might be better of hiring great engineers and giving them more equity. Probably need personal experience to figure out the right answer (if there is one).

I'm all for giving shares based on performance, not on day 1, both for 'advisors' and 'engineers'.

Prove it, then get rewarded.

That's exactly what I'm saying. I haven't asked pg or jl if they'd be willing to do it like this. The paperwork is certainly cheaper, but their stock would have fewer rights. I don't plan on needing the money.

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