Ask HN: Any desperate things you did just to keep your startup alive?
I love the story of how the AirBnB guys sold cereal boxes just to survive. Does anyone know any more similar stories about successful startups.
17 comments
When I started my first software related company at 21 (almost 3 years ago) I had already had some small successes in other businesses, and had a fairly strong customer base to start because of contacts I had made. So I went out hired employees bought copy machines, set up an office etc. But after the 6th pay period (3 months in) I paid all my employees and I had $3.62 left in the company bank account with several unpaid invoices from clients who I did not know very well, since we were working mainly for law firms and they are famous for not paying in a timely manner I did not know what to do.
I went and took an evening job at "geek squad" for $13 hour and started selling cars at a friends car lot on the weekends in a city about 50 miles away so none of my employees would know we were struggling. Often times over those next few months I was paying my employees from money I had earned working those two jobs which none of my employees even knew I had.
I eventually started researching effective ways to collect past due bills and I was harsh and even lost a few customers in my collection tactics, but ultimately learned a great deal about the types of customers I did and did not want which allowed me to realize that having tons of business was not necessarily as good as simply having a smaller, loyal customer base who pays their bills and respects your work.
I can recall one conversation where I was speaking to an attorney's secretary and she told me that after talking to "John" Aka the attorney in question, he simply did not have the money to pay the bill, but he "would get it paid as soon as possible" to which I quickly popped off "Well why don't you tell John that if he doesn't have the money he needs to stop parking his Aston Martin in front of my office."
luckily for me, my young hot headedness paid off and I received a hand delivered check the very next day.
While I struggled for some time to come and eventually spent my entire savings paying my employees salaries the business did eventually succeed and go on to be very sustainable.
When selling the company to a large firm out of Charlotte, NC I was even able to negotiate terms allowing all my employees to keep their same grade of pay for at least 2 years after the sale (they were all on salary and paid above market rate) While I worked harder in those 19 moths than I ever had in my life it was the most fulfilling time that I have ever been through and it shaped the me into the person I am today.
I went and took an evening job at "geek squad" for $13 hour and started selling cars at a friends car lot on the weekends in a city about 50 miles away so none of my employees would know we were struggling. Often times over those next few months I was paying my employees from money I had earned working those two jobs which none of my employees even knew I had.
I eventually started researching effective ways to collect past due bills and I was harsh and even lost a few customers in my collection tactics, but ultimately learned a great deal about the types of customers I did and did not want which allowed me to realize that having tons of business was not necessarily as good as simply having a smaller, loyal customer base who pays their bills and respects your work.
I can recall one conversation where I was speaking to an attorney's secretary and she told me that after talking to "John" Aka the attorney in question, he simply did not have the money to pay the bill, but he "would get it paid as soon as possible" to which I quickly popped off "Well why don't you tell John that if he doesn't have the money he needs to stop parking his Aston Martin in front of my office."
luckily for me, my young hot headedness paid off and I received a hand delivered check the very next day.
While I struggled for some time to come and eventually spent my entire savings paying my employees salaries the business did eventually succeed and go on to be very sustainable.
When selling the company to a large firm out of Charlotte, NC I was even able to negotiate terms allowing all my employees to keep their same grade of pay for at least 2 years after the sale (they were all on salary and paid above market rate) While I worked harder in those 19 moths than I ever had in my life it was the most fulfilling time that I have ever been through and it shaped the me into the person I am today.
I went on the "super noodle diet" - Which consisted of eating 2 packets of instant noodles per day, seasoned with lots of pepper to make it seem more filling. As a treat on a Sunday I had a 99p pizza too! I paid for this with the contents of my penny jar. When that had run out, I survived for another week on cornflakes with golden syrup instead of milk, which were the only things I had in my cupboard.
I lost ~30lbs in the 2 months I was doing this. In the end the startup failed, I swallowed my pride and got my old job back, the one I'd left a year previous to work full time on my startup.
I lost ~30lbs in the 2 months I was doing this. In the end the startup failed, I swallowed my pride and got my old job back, the one I'd left a year previous to work full time on my startup.
We arbitraged Facebook application development when the platform was brand new. I had developed some applications in the first few weeks platform was out, and had done some early work on the predecessor to rFacebook. I used these examples and some well placed adwords ads to drive customers to us. The phone was ringing off the hook with people wanting apps, many calling just to waste our time, but a fair number of solid leads. We hired competent subcontractors to do the development and most of the product management (so we could spend time coding for our startup). This turned out to be a mistake as our subcontractors tried to steal a client from us behind our backs. This of course was against both our contract with the client and our subcontractors.
However, our client was a hedge fund manager with an in house attorney who kept trying to convince me that because of my age (I was 21 at the time) I had no idea what I was doing and was being unethical for subcontracting work. He refused to pay and threatened to have his in house attorney waste enough of our lawyers time to make it unfeasible for us to pursue litigation (we didn't have a lawyers fees clause in our contract in case of disputes). After a lot of back and forth, he ended up settling for 50% of the contract amount ($12.5k IIRC) and we didn't pay anything to our subcontractors as a result of their breach of contract. The $12.5k plus some other purely advisory (non-development) work we did paid for us to stop arbitraging consulting (which was great since we didn't have any subcontractors anymore since we fired them) and to live on for the rest of the summer and work on our startup.
We raised money from YC right before that money ran out.
However, our client was a hedge fund manager with an in house attorney who kept trying to convince me that because of my age (I was 21 at the time) I had no idea what I was doing and was being unethical for subcontracting work. He refused to pay and threatened to have his in house attorney waste enough of our lawyers time to make it unfeasible for us to pursue litigation (we didn't have a lawyers fees clause in our contract in case of disputes). After a lot of back and forth, he ended up settling for 50% of the contract amount ($12.5k IIRC) and we didn't pay anything to our subcontractors as a result of their breach of contract. The $12.5k plus some other purely advisory (non-development) work we did paid for us to stop arbitraging consulting (which was great since we didn't have any subcontractors anymore since we fired them) and to live on for the rest of the summer and work on our startup.
We raised money from YC right before that money ran out.
http://en.wikipedia.org/wiki/John_DeLorean#Entrapment
(If you are not familiar with the story, in a last-ditched effort to save his car company, De Lorean attempted to traffic a large amount of cocaine. Turned out the seller was a federal agent. That is dedication)
(If you are not familiar with the story, in a last-ditched effort to save his car company, De Lorean attempted to traffic a large amount of cocaine. Turned out the seller was a federal agent. That is dedication)
That is not dedication, that is criminal, that is, following the first easy thing you can think of, regardless of the consequences. If he has the dedication, a firm no to the above suggestion, and a further five minutes thinking, would have probably brought up a much honourable means, even in times of desperate need, to get what he wanted.
He managed to avoid prosecution, as he was found not guilty due to entrapment. Entrapment is when the alleged criminal was:
1. given the idea for the crime by the government agents
2. persuaded or talked into committing the crime by government agents
3. not ready and willing to commit the crime before the government agents spoke with him.
So no, it wasn't "the first easy thing you[he] can [could] think of".
EDIT: Formatting.
1. given the idea for the crime by the government agents
2. persuaded or talked into committing the crime by government agents
3. not ready and willing to commit the crime before the government agents spoke with him.
So no, it wasn't "the first easy thing you[he] can [could] think of".
EDIT: Formatting.
Fred Smith, the founder of FedEx, took the last $5000 in the company's bank account to Vegas so they could afford to make the ~$30k fuel payment they needed to stay in business. Turned out pretty well for him ;-)
I went on a few 24 hour online poker binges to pay the rent. I won a lot, but had to borrow money from my parents because it took over a week to cash-out.
Also drove to Foxwoods to play poker once with my co-founder when we were particularly desperate. We only had enough money for one buy-in ($300). Figured that if I was asking my parents for money again, asking for an extra $300 was worth the risk, if I had a chance to win and not ask for anything.
Bill also took random jobs on Craigslist (helping people set up pod-casts, writing papers for wealthy foreign students, etc.)
I taught the LSAT and did "law school admission consulting" which basically translated to helping people write personal statements.
Also drove to Foxwoods to play poker once with my co-founder when we were particularly desperate. We only had enough money for one buy-in ($300). Figured that if I was asking my parents for money again, asking for an extra $300 was worth the risk, if I had a chance to win and not ask for anything.
Bill also took random jobs on Craigslist (helping people set up pod-casts, writing papers for wealthy foreign students, etc.)
I taught the LSAT and did "law school admission consulting" which basically translated to helping people write personal statements.
That was about ten years ago. For a while there, we did pretty good: hovering stable at around 10 employees, mostly custom web projects for advertising agencies. One day we took on a very nice-sounding project for a local manufacturing company. One company-year flowed into the project, we did almost nothing else. At the end, the project was canceled and they wanted their money back because they were on the brink of bankruptcy (a move that despite our contract was OK'ed by German courts).
It all went downhill from there, but I still hung on for a few months. Didn't want to fire anyone. I took out crazy loans to keep this lead balloon afloat, but there was really no turning around. And it pretty much ruined my life.
It's a cautionary tale, really. I should have allowed this company to fail at a time when I still could have walked away without some serious damage. The company was done. It had no product, burned-out employees and no prospects. I wouldn't make that mistake again today. The lesson here being that desperation is never a good sign. When you're doing a startup, what you want is hunger and euphoria. Not desperation.
It all went downhill from there, but I still hung on for a few months. Didn't want to fire anyone. I took out crazy loans to keep this lead balloon afloat, but there was really no turning around. And it pretty much ruined my life.
It's a cautionary tale, really. I should have allowed this company to fail at a time when I still could have walked away without some serious damage. The company was done. It had no product, burned-out employees and no prospects. I wouldn't make that mistake again today. The lesson here being that desperation is never a good sign. When you're doing a startup, what you want is hunger and euphoria. Not desperation.
I live in a little house in one of the poorest countries in the Americas, making Flash games every now and then to fund me and my startup.
If I was back home (AU) then I couldn't have come anywhere near as far as I have - my cost of living here is like $500/month. I'm able to devote a tremendous amount of time to my startup.
If I was back home (AU) then I couldn't have come anywhere near as far as I have - my cost of living here is like $500/month. I'm able to devote a tremendous amount of time to my startup.
Which country?
Nicaragua, but all of Central America's a great place to live ridiculously cheap and hack away. Plus they're beautiful countries and latinas are so hot.
The internet's not fantastic (a crappy 1 megabit, and outages happen at least once a week), half of the TV is in Spanish, and you have to be careful sometimes since white guys are usually cashed up tourists and ripe for a mugging.
But when push comes to shove it beats trying to make $1000 rent + living expenses and trying to balance a startup around that.
The internet's not fantastic (a crappy 1 megabit, and outages happen at least once a week), half of the TV is in Spanish, and you have to be careful sometimes since white guys are usually cashed up tourists and ripe for a mugging.
But when push comes to shove it beats trying to make $1000 rent + living expenses and trying to balance a startup around that.
Thanks for the details. This is getting a bit off-topic, but can you describe how a foreigner should go about finding a place to live in Central America? Did you just fly there and look for "For Rent" signs or did you line something up beforehand?
I constantly travel to Latin America, speaking at conferences and recruiting talent. I've lived/worked in Chile, Argentina, Mexico, Peru Colombia and traveled to Honduras and Guatemala.
If you want to go to central america let me know. I can introduce you to the tech/startup community there. They can hook you up with the best/safest placest to live, work areas, and the whole thing.
My personal experience is with Guatemala and Honduras, though I know top notch developers and entrepreneurs (all bilingual) throughout the whole region.
If I were you, I'd pick costa rica to live in if you want to live in Central America. Bigger expat community, great nearshoring tech talent. Though Chile will give you $40k to startup in Chile.
When I go live/work at a LATAM country my process is usually:
1. Stay in a hostal for two days, those two days I check out places to rent 2. In south america, you can find great stuff on craigslist, furnished rooms or studios from $200-$500/mo 3. Meet local entrepreneurs, and find coworking spaces/become an office guest.
If you need more tips/intros for living in LATAM, my email is in my profile, or @andresbarreto
If you want to go to central america let me know. I can introduce you to the tech/startup community there. They can hook you up with the best/safest placest to live, work areas, and the whole thing.
My personal experience is with Guatemala and Honduras, though I know top notch developers and entrepreneurs (all bilingual) throughout the whole region.
If I were you, I'd pick costa rica to live in if you want to live in Central America. Bigger expat community, great nearshoring tech talent. Though Chile will give you $40k to startup in Chile.
When I go live/work at a LATAM country my process is usually:
1. Stay in a hostal for two days, those two days I check out places to rent 2. In south america, you can find great stuff on craigslist, furnished rooms or studios from $200-$500/mo 3. Meet local entrepreneurs, and find coworking spaces/become an office guest.
If you need more tips/intros for living in LATAM, my email is in my profile, or @andresbarreto
If you are instrested in coming to a country in Latin America im from Uruguay (little country between Argentina and Brazil) and I can help you to accommodate you here. We are one of the safest countries of the continente, we are a loooooot cheaper than US or Europe and the main advantage of Uruguay compared to the rest of LA is that most people speak English and you will find a lot of engineers, computer developers, desingers and more usefull people to hire to set up your new start up (the computer-related careers are very popular here)
They really aren't into things like Craigslist or real estate listing sites. Houses/apartments for rent is literally done by a sign on the place combined with word of mouth, and often purely word of mouth.
Probably your best bet would be going to a backpackers hostel and finding one while you stay there - they'll set you back as little as $10ish a night, have internet and interesting people to talk to, and the people working there might know of a place and/or you can walk around looking for somewhere.
Probably your best bet would be going to a backpackers hostel and finding one while you stay there - they'll set you back as little as $10ish a night, have internet and interesting people to talk to, and the people working there might know of a place and/or you can walk around looking for somewhere.
Excellent. Are short-term (1-3 month) leases available? What precautions do you take to stay safe?
You'll probably forfeit your one month bond (aka $200 - $400) if you leave that soon.
Staying safe is pretty simple - be smart. An iPhone is a month's salary down here so don't wander around talking into it or wearing those pretty white earphones. Don't carry a satchel around that says Dell, and generally don't take more than you need when you hit the street ... if you're getting a carton of milk you don't need your wallet or the credit cards and $500 in it.
Staying safe is pretty simple - be smart. An iPhone is a month's salary down here so don't wander around talking into it or wearing those pretty white earphones. Don't carry a satchel around that says Dell, and generally don't take more than you need when you hit the street ... if you're getting a carton of milk you don't need your wallet or the credit cards and $500 in it.
In contrast don't do this in Panama. It's freaking expensive in comparison. Renting a room in a decent part of town can cost you around 700 dollars. And that's just a smallish room. A decent studio will cost you 1 ~ 1.2k. If you go down with 2 friends you can get a room in not so decent but really not that bad area for 1.2 ~ 2k with 2 or 3 rooms. Gotta pay for your ow internet though.
Been doing the same thing - Argentina, then later Thailand and Vietnam - while working on my startup and turning flash projects to pay the bills. Telecommuting from the third world is where it's at.
Made the arguable mistake of spending 9 months in Australia on my way to S.E. Asia and it ripped my pocketbook to shreds. That was when the AUD was almost 1:1 with the USD.
Made the arguable mistake of spending 9 months in Australia on my way to S.E. Asia and it ripped my pocketbook to shreds. That was when the AUD was almost 1:1 with the USD.
In the early days of my first company my co-founder ran into visa issues. He was a British national and post-September 11 his H1B was coming due. At the time the company couldn't sponsor him due to prevailing wage issues so he had to leave the country. Within the span of 2 months I moved from Austin, TX to Sydney, Australia with my co-founder and his family. When I arrived I had no where to live, nothing (living w/ my co-founder was not really possible, mostly because he had four kids and adding a fifth would have driven everyone insane). I initially setup in a hotel and eventually found an apartment. We did it so we could continue to press forward knowing that such a large separation of distance would effectively kill the company. My girlfriend (now wife) stayed behind in Texas. I lived in Sydney on a tourist visa, leaving every 3 months and re-entering. I lived off my credit card and whatever hardware I could sell on eBay. This lasted for about 9 months. After we had made enough progress I came back and about 6 months later we had our first round of venture financing. When we got the check I had about $500 in my bank account.
Only now can I really look back at that time and appreciate what a huge opportunity it was. Most people only have one shot in life to take infinite risk. Eventually life kicks in and you have to start making more measured decisions. However, even with the huge amount of risk I took back then it almost certainly would not have been possible had it not been for my very supportive family and girlfriend. I knew that no matter what happened I could always go home and tell them I gave it my best shot and life would go on.
Only now can I really look back at that time and appreciate what a huge opportunity it was. Most people only have one shot in life to take infinite risk. Eventually life kicks in and you have to start making more measured decisions. However, even with the huge amount of risk I took back then it almost certainly would not have been possible had it not been for my very supportive family and girlfriend. I knew that no matter what happened I could always go home and tell them I gave it my best shot and life would go on.
Ha, we didn't consider selling cereal since we're not good at it. :-) So, when we needed money we decided to stick to what we knew best and started another service-oriented, and therefore instantly profitable, startup: http://buildasandcastle.com
did it work?? how long before you got your first check from buildansandcastle?
The AirBnB cereal boxes is more genius than desperate. I consider desperate things like the Zappos story where Tony literally sold everything he owned to keep the business afloat.
[deleted]
I think it was more desperate than genius since it was nothing to do with their product and the goal there was to earn money to sustain them further. The expo>shortage>CNN coverage is an example of a genius move by the same guys.
Someone who is a member of a lesser known six person startup (the other five of which Im sure are lovely people) took some front end development work from me, then dissappeared off the face of the earth - no Skype, no email, no phone calls - before the product could be completed, without warning. The guy is otherwise a nice person, but I get the feeling he was desperate for the cash and did a bad thing.
You paid ahead of delivery or just a (small) downpayment ?
I paid per milestone, which were set by the developer according to his own estimation of delivery, with a thousand dollar plus bonus to meeting his own schedule. there was never any dispute, just the occasional 'I'm sorry this has taken so long, something came up' until after getting paid for near completing the first three milestones, he disappeared.
I was in another continent, so after all communication failed, decided not to peruse the matter. However I ran into him at PyCon this year, about 2 years afterwards. I didn't say anything, as to not cause a commotion. I'm over it, and a lot has changed in my life since, including that I can now do all the work I once needed him for.
I was in another continent, so after all communication failed, decided not to peruse the matter. However I ran into him at PyCon this year, about 2 years afterwards. I didn't say anything, as to not cause a commotion. I'm over it, and a lot has changed in my life since, including that I can now do all the work I once needed him for.
Built a MFA (made-for-adsense) site: http://www.snapspans.com/
:)
:)
Care to share little more? Where traffic come from, how you built it, estimated revenue...
I was thinking about advertising arbitrage at the time. Arbitrage, simplified, works like this:
1) Buy something for a price.
2) Sell for a very tiny bit more.
3) Repeat as much as possible, for as long as the market sustains the price difference.
Early on in AdWords/AdSense, some sites were able to buy traffic from a cheap keyword and put up basically a thesaurus page with the higher value pay-per-click (PPC) ads more than covering expenses (eg. pay $0.05 per visit for a N visitors, then by optimizing conversions encourage click-throughs for > $2.00 each).
Later, before the online ad-market shook out upstarts, it was often possible to buy traffic from one source and sell it on another, most often to or from AdSense. Hence a proliferation of MFA sites (with almost no content but relevant AdSense links).
But not thinking too hard suggests that paying nothing for traffic, not paying less, is even better. So with an entrepreneur's ethics, I figured:
a) Business names and addresses are long tail search terms and not under copyright
b) Dense Pages of Long Tail Search Terms => Targeted, Specifically Motivated Traffic
c) (+ AdSense) => User Gets A Solution (finds a service) + PROFIT
I designed a logo, scraped some yellow pages, and it made some money. Continual earnings trumped the dreams to conquer the internet.
Incidentally, the name is a palindrome, and rotating the logo through 360 degrees both spells out "snapspans" and looks like a yin-yan:
http://www.snapspans.com/
EDIT: Somewhat erratically, as search engine rankings update every so often, it's at ~30K visitors and ~$450/month. It got spidered because of a link exchange with another more established site.
EDIT2: Probably a good opportunity to write a blog post and submit, but only if people care.
1) Buy something for a price.
2) Sell for a very tiny bit more.
3) Repeat as much as possible, for as long as the market sustains the price difference.
Early on in AdWords/AdSense, some sites were able to buy traffic from a cheap keyword and put up basically a thesaurus page with the higher value pay-per-click (PPC) ads more than covering expenses (eg. pay $0.05 per visit for a N visitors, then by optimizing conversions encourage click-throughs for > $2.00 each).
Later, before the online ad-market shook out upstarts, it was often possible to buy traffic from one source and sell it on another, most often to or from AdSense. Hence a proliferation of MFA sites (with almost no content but relevant AdSense links).
But not thinking too hard suggests that paying nothing for traffic, not paying less, is even better. So with an entrepreneur's ethics, I figured:
a) Business names and addresses are long tail search terms and not under copyright
b) Dense Pages of Long Tail Search Terms => Targeted, Specifically Motivated Traffic
c) (+ AdSense) => User Gets A Solution (finds a service) + PROFIT
I designed a logo, scraped some yellow pages, and it made some money. Continual earnings trumped the dreams to conquer the internet.
Incidentally, the name is a palindrome, and rotating the logo through 360 degrees both spells out "snapspans" and looks like a yin-yan:
http://www.snapspans.com/
EDIT: Somewhat erratically, as search engine rankings update every so often, it's at ~30K visitors and ~$450/month. It got spidered because of a link exchange with another more established site.
EDIT2: Probably a good opportunity to write a blog post and submit, but only if people care.
Haven't done it myself, but I'm guessing most startups can and do take on consulting/outsourcing gigs for side money.
That's not particularly desperate though. Often the startup ends up boosting the consulting side of a business to the point that it's making you more money in business development than in actual on-site revenue.
Hot dogs and peanut butter burritos.
if anyone's curious what the post is referring to,
http://en.justin.tv/startupschool/b/272007200
starts @23:00 or so
http://en.justin.tv/startupschool/b/272007200
starts @23:00 or so
I coached tennis for some extra money on the side.