Ask YC: Part-time consulting while working on a startup, good idea?
21 comments
So, this is exactly what we've done. Briefly:
(1) The comments saying that it's hard-to-impossible to transition from consulting to product are correct. Two problems: (a) it takes more than just discipline to walk away from money --- it takes reckless speculation, and that's painful; (b) consulting hours don't bucket neatly, and don't schedule neatly, and so you're constantly being disrupted.
(2) That said, we now have multiple full-time people working on product, which we're launching soon. The classic consulting model is a pyramid scheme, where people claw their way to "partner" and get fat off profit sharing. In the product-consulting model, instead of setting aside money for partners, you pay full-time devs. This appears to work.
If I had to choose between VC and consulting, and my consulting practice was lucrative (ours is: software security billable hours are expensive), I'd do consulting again, even though it cost us a year. Reasons:
* I'll trade a year for control over my own destiny.
* The year is a false economy, since, for most companies, getting funding takes many speculative months.
* There are things about running a consultancy as a business that translate to running a product business, and running a business is a valuable skill.
* The networking and customer face time you get from consulting is hugely valuable.
* Time to market is simply overrated.
(1) The comments saying that it's hard-to-impossible to transition from consulting to product are correct. Two problems: (a) it takes more than just discipline to walk away from money --- it takes reckless speculation, and that's painful; (b) consulting hours don't bucket neatly, and don't schedule neatly, and so you're constantly being disrupted.
(2) That said, we now have multiple full-time people working on product, which we're launching soon. The classic consulting model is a pyramid scheme, where people claw their way to "partner" and get fat off profit sharing. In the product-consulting model, instead of setting aside money for partners, you pay full-time devs. This appears to work.
If I had to choose between VC and consulting, and my consulting practice was lucrative (ours is: software security billable hours are expensive), I'd do consulting again, even though it cost us a year. Reasons:
* I'll trade a year for control over my own destiny.
* The year is a false economy, since, for most companies, getting funding takes many speculative months.
* There are things about running a consultancy as a business that translate to running a product business, and running a business is a valuable skill.
* The networking and customer face time you get from consulting is hugely valuable.
* Time to market is simply overrated.
Q1) Do you have the resources to survive if it takes 6 to 8 months instead of 3 months? Being done with a product in month 3 doesn't mean sales will start rolling on month 3, day 1. Think revenue date, not launch date.
Q2) Do you have the mental self-discipline to focus on one thing at time... even when you have two things on your plate or are you more productive when you only have one thing on your plate?
Q3) Have you started talking with your future customers yet? If not, talk to them first. Confirm they need what you're building. Do they need it bad and now? Assumptions can hurt.
Q2) Do you have the mental self-discipline to focus on one thing at time... even when you have two things on your plate or are you more productive when you only have one thing on your plate?
Q3) Have you started talking with your future customers yet? If not, talk to them first. Confirm they need what you're building. Do they need it bad and now? Assumptions can hurt.
Two little stories:
A friend of mine has been trying since 10 years to transform his consulting company into a product company - without success. The projects he has implemented were too expensive in terms of development and maintenance to have enough time apart. And none of the projects was general enough to produce a code-base that could serve as a product for several customers.
Another friend implemented a little access-based niche-domain tool during an internship for a big enterprise that he was able to resell to several competitors and even several times within the same enterprise. He is working around 5 hours per week and makes a confort living.
Honestly, I think the first story gives the more likely scenario.
I'm biased to the security software market, but note that it's a market where companies have constantly tried to play the "productize-the-service" card. What I've observed is, this almost never works.
In fact, taking a consulting approach to product development (working closely with a first customer) also slowed us down drastically, and our product actually has very little to do with our service (what we're launching has nothing to do with reverse engineering software).
There are also some high-profile failures behind our strategy: building a straight-up consultancy to "fund" a full time product group.
But then again, who knows? Building a business is hard. It is not like applying to college, where you clear some "acceptance" hurdle and then you do your homework and everything works out. With the best people, the most credible strategy, and even the right market timing, circumstances can still screw you over.
In fact, taking a consulting approach to product development (working closely with a first customer) also slowed us down drastically, and our product actually has very little to do with our service (what we're launching has nothing to do with reverse engineering software).
There are also some high-profile failures behind our strategy: building a straight-up consultancy to "fund" a full time product group.
But then again, who knows? Building a business is hard. It is not like applying to college, where you clear some "acceptance" hurdle and then you do your homework and everything works out. With the best people, the most credible strategy, and even the right market timing, circumstances can still screw you over.
Maybe the one just got lucky and the other was unlucky? It's just anecdotal evidence. The HotOrNot founders got rich by scribbling something on a coaster (or something like that) - doesn't prove we should spend more time in bars to create a successful startup. Or maybe it does :-/
I can only think of two good reasons to do consulting while you're working on your startup:
1) You don't have enough money to survive without the income from consulting. 2) Your consulting gig will help with sales in your startup (specifically, you think the company you're consulting for will buy your product once it is built).
Even if reasons 1 and/or 2 are at play, it still is a distraction. I do consulting for reason 1, but I plan to outmode that with an upcoming angel round. I am not doing all that much consulting these days anyway, but I still feel like it is a hindrance. See a semi-recent blog post about it here:
http://blog.jabbik.com/2008/03/momentum.html
1) You don't have enough money to survive without the income from consulting. 2) Your consulting gig will help with sales in your startup (specifically, you think the company you're consulting for will buy your product once it is built).
Even if reasons 1 and/or 2 are at play, it still is a distraction. I do consulting for reason 1, but I plan to outmode that with an upcoming angel round. I am not doing all that much consulting these days anyway, but I still feel like it is a hindrance. See a semi-recent blog post about it here:
http://blog.jabbik.com/2008/03/momentum.html
I can think of one other good reason to consult when you're working on a start-up ---- the consulting project that you're working on is something that will teach you something that you need to know in order to make your start-up successful. There's nothing better than learning on someone else's dime. Especially if the company for which you're consulting has some particuarly smart people or cutting-edge resources that you wouldn't have access to otherwise.
Contract work can be a great way to bootstrap the business if you're careful about it. I chose projects that we're high paying and easy to walk away from (corporate training, wrote a second edition of a book, strange enterprise documentation gigs).
Once we had a product we could sell there was a temptation to push it on any person with money. The problem with taking those kinds of customers is that it ties down your product. Keeping an independent stream of income would have given us more flexibility after we'd launched the product.
Also, some people say that having side projects makes it hard to focus on your main project. I found the opposite, having a main project that I loved made it very hard to focus on the side projects.
Once we had a product we could sell there was a temptation to push it on any person with money. The problem with taking those kinds of customers is that it ties down your product. Keeping an independent stream of income would have given us more flexibility after we'd launched the product.
Also, some people say that having side projects makes it hard to focus on your main project. I found the opposite, having a main project that I loved made it very hard to focus on the side projects.
It's a decision you have to make depending on your finances.
If you can work for 3 months on the startup without feeling any financial burden I'd go with that but if these 10 hours of work a week translate into a good chunk of money it may be worthwhile to do it.
A few questions to ask yourself:
1. Could the 3 months potentially turn into more?
2. Can you set the hours you will be working to accrue the 10 hours or will the client be calling you whenever they have issues? The first scenario is more preferable.
3. If you do the 10 hour option you can try to do it the same day as your partner so then you have more time together.
Just my thoughts..
If you can work for 3 months on the startup without feeling any financial burden I'd go with that but if these 10 hours of work a week translate into a good chunk of money it may be worthwhile to do it.
A few questions to ask yourself:
1. Could the 3 months potentially turn into more?
2. Can you set the hours you will be working to accrue the 10 hours or will the client be calling you whenever they have issues? The first scenario is more preferable.
3. If you do the 10 hour option you can try to do it the same day as your partner so then you have more time together.
Just my thoughts..
Thanks for everyone's input. To answer some questions and comments being posted:
1. I do have enough funds to last 6 to 8 months on my own if I had to.
2. I'm not sure if I'm going to learn much on the project I am on because now my role is more advisory, but I will interact with potential service providers for my startup.
3. I do think that I have issues focusing on two projects at the same time because I like to do a good job on whatever I'm doing. This also means that there is a good possibility of me spending more than 10 hours a week on the project.
4. We have been talking to a small set of our future customers, and they can't wait for it to launch. And it needs to launch now.
I've made the decision to go 100% on my startup, and not worry about consulting. Someone reminded me how I worked through college and have always regretted it, wishing I would've have just taken a loan and paid more attention, had fun, etc. I don't want to look back at this and say "If I just did it 100%"
Thanks for all your advice and opinions, it really did help.
2. I'm not sure if I'm going to learn much on the project I am on because now my role is more advisory, but I will interact with potential service providers for my startup.
3. I do think that I have issues focusing on two projects at the same time because I like to do a good job on whatever I'm doing. This also means that there is a good possibility of me spending more than 10 hours a week on the project.
4. We have been talking to a small set of our future customers, and they can't wait for it to launch. And it needs to launch now.
I've made the decision to go 100% on my startup, and not worry about consulting. Someone reminded me how I worked through college and have always regretted it, wishing I would've have just taken a loan and paid more attention, had fun, etc. I don't want to look back at this and say "If I just did it 100%"
Thanks for all your advice and opinions, it really did help.
10 hours per week is not that much, stick with the current project, plus, its good to have some cash flow for ramen :-).
10 hours billable --- 2 out of 5 work days --- can easily wind up being 20 hours of wall clock time, factoring in ramp-up, off-the-clock support, documentation, non-billable research time, and then the overhead of dropping in and out of your product.
Of our original 3-person founding team, excluding all the hires since then, we've found that none of us can keep up with the FT devs, even when we work out one-week scheduling bubbles. This is obviously a classic "flow" problem.
I'm from dev originally, not consulting, and I was surprised by how expensive (timewise) services work is.
Of our original 3-person founding team, excluding all the hires since then, we've found that none of us can keep up with the FT devs, even when we work out one-week scheduling bubbles. This is obviously a classic "flow" problem.
I'm from dev originally, not consulting, and I was surprised by how expensive (timewise) services work is.
Services is expensive, but you should be billing for some of those things like off-the-clock support, documentation, research, etc.
Depends on the customer, but we never bill for rustproofing. Get used to bending over backwards for people who pay you now; good survival skill. Truism: it's the perception of customer service that people appreciate, not the execution of it.
Not if you can help it, unless the consulting directly feeds into your product. I find it's better, mentally, to focus on something 100%, rather than worrying about both your product and your clients problems, unless the latter is really something you can do on autopilot.
But you consult. Do you think you're making a mistake doing that? Or is your web page just out of date?
I said, "if you can help it", but unfortunately, I can't help it. I speak from experience when I say that it's distracting, and that periods where I've been able to focus 100% on something are vastly more productive.
Hear that. If you could choose to take a typical predatory VC round, putting a few mil in the bank and losing control of your board, would you trade positions from where you are now?
Well, if we're talking about stuff that's not very likely, I'd be pretty happy to go through the YC program, actually. Barring that, finding a niche product that's sustainable, but not 'get rich quick' material would make me happy.
I saw the bad side of what VC's can be like at Linuxcare, and it's pretty ugly.
I saw the bad side of what VC's can be like at Linuxcare, and it's pretty ugly.
I would recommend putting 100% on the startup for 3 months. I find that I can get a lot done if I put 100% of my time into anything for 3 months. You'll probably get enough done that people will be able to get an idea about what the product could become. By that time you'll either be able to find investors or realize that it's time to move on (or go back to full time consulting).
There is a reason the yc session is 3 months long. That's probably about all you'll need to prove your concept. Save up the bare minimum you need to survive and go. Good luck either way!
There is a reason the yc session is 3 months long. That's probably about all you'll need to prove your concept. Save up the bare minimum you need to survive and go. Good luck either way!
Its easy to get consumed by consulting and not make much progress on your own products. With contracting, you must spend time finding new contracts, accounting, and sometimes even legal issues.
I wasted years contracting instead of working on my own projects full time. All my energy was drained by the clients I had.
I wasted years contracting instead of working on my own projects full time. All my energy was drained by the clients I had.
I made a decision to quit my current contract and go full-time on my startup so that we can get it to market fast. Once I notified my client, I was offered an option to work 10 hours per week on the current project and have the rest of the time for my startup.
What are the pros/cons of doing or not doing this? Is this advisable? Should I just put 100% on startup for 3 months?
Thanks for all opinions/advice in advance.