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Poll: What was your financial situation when you started your startup?

162 points by niggler ↗ HN
Simple question. I want to get a sense for whether people are really starting from a position of destitution or if they already secured something before they start (or if they have a cushion)

Note: the last few options (starting with "Side project+: You have an existing job and are continuing either full time or part time while you start the business") were added between 10 minutes and an hour after the poll started ("Live on social welfare programs (social security, unemployment checks)" was added after more than 300 votes were cast) , so some of the results will be skewed

145 comments

[ 2.9 ms ] story [ 216 ms ] thread
scoj
It seems like there should be a few more options.

My case would be bootstrapping and paying bills through parttime contract work.

niggler
You are either doing contract work to extend your existing runway -- you saved up 6 months expenses, and the contract work is what allows you to let the business build for a few extra months (in which case you have a runway and the fourth option applies) -- or doing it to survive the next few months (in which case the last option applies)

Even though I disagree that it's a separate category, I added " You have an existing job and are continuing either full time or part time while you start the business"

tibbon
Ditto. Contracting to make it work.
mindcrime
You left out an option:

"Nothing. No savings to speak of, but self-funding through my salary at a $DAYJOB or consulting."

That's pretty much where we are at Fogbeam Labs. The plus side is, we have a nearly infinite amount of runway, as long as the co-founders have jobs. The downside is, we're stuck working the $DAYJOBS 40 hours as week, and have to make time for the startup by night + weekend.

niggler
"self-funding through my salary at a $DAYJOB or consulting"

You are right, I didn't include the case of doing it on the side.

EDIT: added " You have an existing job and are continuing either full time or part time while you start the business"

bartonfink
Do you think you'd be able to keep up the nights/weekends commitments without cofounders?
mindcrime
I can't speak for anybody else, but I slaved away on this for a year or more before a co-founder came onboard. How much longer it would have gone if that hadn't happened, is hard to say. I'm pretty persistent though.
orangethirty
Nothing, at all. No car. No job. Not even unemployment or government benefits. Started doing software consulting. Grew it to a good size. Then started doing business development consulting. That is still growing. Started a couple micro businesses, all of which are profitable. Developing Nuuton, and another micro.

All in 3 years time. (:

How did I do it? I don't take no for an answer.

Edit:

Oh, and no VC money.

vecinu
That sounds like a successful path to growing healthy companies.

I'd like to be in your 'business shoes'.

orangethirty
My path is not the same as yours. You have to find out for yourself. Go out, don't take no for an answer, and realize that the only thing keeping from success is failure. Fail more.
vecinu
Wise advice.

I have a hard time insisting on certain things but I will need to work on that. I know successful folks are insistent and never accept no.

Kluny
How on earth do you convince people that they need to hire a consultant? Serious question.
orangethirty
Oh, that's easy. I simply advertise myself as such. Say, a post on HN or Craigslist (SF, Austin, NY, Denver) stating that I am available for hire. I put my rates in the ad to make sure that people who contact me can pay my rates (which are not really high, I don't charge that much), and sit back. Really simple. If you really want to hack it, just start blogging about the specific type of programming you want to do, and have your contact details in a place where people can see it. I did that for a short while, but I'm to busy to blog these days.

I also make sure to treat people as such, and not as walking dollar bills.

Try it out, it works.

Edit:

Here is a template for an ad you can use.

Headline/post title: $language_name developer/engineer/programmer available for hire.

Body:

$language_name developer/engineer/programmer available for hire. Rates are $rate. Mature and responsible. Focused on working with serious people.

Remote only.

* That's it. Dont give out too much information, because you are only pre-qualifying leads (people who respond to it are very likely to be able to afford your rates and meet your requirements). Then just work out the deal through email/phone/whatever.

Kluny
Can't believe it's that simple. I'm almost afraid to try it, in case I don't know what to do if I get a client.
orangethirty
Well, you negotiate the conditions of the contract, write the code, and make sure everything runs correctly. Nothing to it, really.

I actually teach people like you how to do this properly. Course costs $299. It is taught live, and it prepares you to point where you can consult confidently. Shoot me an email if you are interested. Too expensive? You will make 10 times that amount on the first month.

obviouslygreen
Looks like I'm in the majority on this one; there's no way I would've been able to save up a significant amount without then thinking "hey, if I saved up that much..." so I went with what I had. Fortunately not being a financial idiot goes a long way, even when that just means not living on debt.

While a side project might technically be a startup, for purposes like this poll, it hardly seems relevant; that doesn't carry nearly the risk -- real or perceived -- of actually working on something new full-time.

dude_abides
You left out a (probably very common) option: You have an earning spouse.
niggler
While "Family" technically includes spouse, I see how my use suggests only parents, grandparents, and other relatives; I'll add "Earning Spouse" to the list
[dead] littlespark
Regular job 9-5 is how I fund everything. I do my startup on the side, nights and weekends. I know it will work.
teuobk
I had about two weeks of cash left at the time my product finally got traction. It was right down to the wire.

Ah, bootstrapping...

herval
On my first one, I had about 5k I gathered on small jobs during college years. Lost it all (and then some more), had to sleep in a client's floor for a week+ before I could afford a (windowless) roof again, but didn't give in for almost 2 years.

On my second, had enough to pay my bills from side-projects. Didn't make any money, but didn't get to sleep on the streets (which was sort of bittersweet - among the "survivors" from this period are companies such as Rovio, Gameloft and Kiloo)

On my third, had enough money not to have to work for a year or two. Got to sell the business in a good moment, for a reasonable amount.

From first to last, my actual anxiety about losing what I've amassed was exponentially higher on each try. I guess having more to lose plays a VERY important factor in determining how much effort/faith you put in a project (and how much pain can you endure before giving up)...

kurtko
I guess I am in the majority - five years ago, I was just coming out of graduate school and gave myself three months to become 'ramen profitable'. To my amazement (and especially the amazement of folks around me) it worked out, just barely, which gave me license to keep going.
cajuntrep
At JobKaster, we all have an existing job, and are working nights and weekends.

I'm married and have a baby on the way, so I have to be able to support my family and manage risk.

Could we grow faster if we were full time? Maybe. But we might as well prove that the project is going to be profitable before we jump all in!

bmac27
Bootstrapping with day job. Will clear six months of runway by June, maybe sooner but would like to be throwing off at least enough cash to pay all of my non-rent expenses (which total less than my rent).

Once I get to six months and leave the day job, I'm contemplating taking on at least part-time client work to extend the runway a bit but I'm concerned about distractibility from the business. Really would like to go full bore on what I'm working on for six months. Plus I wouldn't know where to start with the client work, as I don't have any existing search marketing clients and I don't know how long it would take me to build up enough cache to bring in semi-regular consulting work. Ugh.

mixmax
You missed one, which I know a few people that have used: Live on social security for a year until you get your startup off the ground. If you don't you go get a normal job.

This, of course, requires that you live in one of the Nordic countries, or another welfare state. We don't have many advantages in the Nordic startup circles, but at least there's this :-)

niggler
Added "social welfare programs" which encompasses stuff like social security and unemployment benefits.
mixmax
Well it seems that this option now has one vote :-)

On a sidenote, it skews the poll quite badly when you add options this late. Nothing against you personally - just something to note.

niggler
I'm going to add a comment about that
icelancer
>This, of course, requires that you live in one of the Nordic countries, or another welfare state. We don't have many advantages in the Nordic startup circles, but at least there's this :-)

Hardly. I lived on UI in America after being laid off of the Evil Empire in Redmond. There I planted the roots for my startup, which I run today.

nostromo
Unemployment Benefits are actually pretty generous in many parts of the US. http://fileunemployment.org/unemployment-benefits-comparison...
zura
What about health insurance for unemployed?
cookiecaper
It's called Medicaid.

http://en.wikipedia.org/wiki/Medicaid

Spooky23
You need to be careful when mixing business ventures with safety net programs. Once you start making any kind of money, you need to get out of medicaid asap -- if the County figures out that you have assets, they will want to "recapture" the benefit value that was provided to you.

Just make sure you know the rules before going this route.

jhaglund
You don't get unemployment if you voluntarily leave your job. edit: or a contractor.
imjk
My startup journey consisted of incremental stages in terms of my financial growth. I started with some student loan money designated for books and learned some affiliate marketing arbitrage. The first day I spent $50 and made about $50 profit. I consistently doubled down my earnings for a few months until I had a pretty solid reserve. After about 2 years, I had decent amount of savings (in the low to mid six figures) and hadn't changed my lifestyle much at all. At this point I met my cofounders, who were in similar situations as myself, and we pooled most of our savings together to start our company.

Along the way I made several risky bets -- doubling down my money on more than one occasion -- but I was never really in that risky of a situation because I had so little to start with. I was just a relatively broke student with some student loan money.

Chris_Newton
I voted “Side project+”, but in reality I do freelance contract work on one hand and have my start-up on the other, spending time on the latter as my varying contract workload allows. The same is true of the other person most involved with the start-up.

The downside to this is that it’s taken significantly longer to get near launching than it would have done if we had been working full-time, multiple years in our case where perhaps we could have done the main development work inside a year. Naturally that can be frustrating.

The upside is that we’ve been able to manage our finances sustainably until we are nearly ready. The nature of what we’re doing means some aspects of our timetable are always going to be partly outside of our control, depending on for example how quickly we can co-ordinate other parties who are contributing or how fast various new technologies evolve and reach a useful level of adoption. Sometimes we just have to wait for things on the critical path, so I doubt we would ever have made it this far if we’d dumped the paying work and relied on some form of limited runway to switch completely.

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peterarmstrong
If bootstrapping by consulting counts as "go into prostitution" then that's me I guess!
OldSchool
I was 20-something, quit my very first engineering job and started consulting here and there while developing a product. I had a pile of credit cards that I used heavily at times but never maxed or missed a payment. Worst case would've been personal bankruptcy but one product led to another over time. Your customers will tell you what they will buy.

The hardest things are avoiding distraction and starting in the first place. Don't be paralyzed trying to find perfection before you're willing start or you never will. Also, don't get drawn into "auditioning" for investors, just blaze your own trail, making sure that whatever you produce is something that people will pay for.

brianmcconnell
I think the consulting route is generally a good one. If you establish yourself as an expert in the right area, you can charge good money. Just pick your clients carefully, and you can work part-time consulting, and the rest of the time on your project.
lucisferre
Hmmm, this is a bit hard for me since more than one of these is true to some degree or another.
niggler
You can choose multiple options, although usually one factor is closest to reality
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shadykiller
Looks like a karma bait to me
niggler
This was a genuine question

Context (for posterity sake): https://news.ycombinator.com/item?id=5404216 (conversation between myself and pytrin)

In particular, the last three posts:

https://news.ycombinator.com/item?id=5404743

https://news.ycombinator.com/item?id=5404879

https://news.ycombinator.com/item?id=5404996

<niggler> Many if not most entrepreneurs already made their FU money or already had a cash reserve.

<pytrin> It's pretty shocking to me the different worlds we live in. You honestly think that most startups are created by people with FU money?

<niggler> "You honestly think that most startups are created by people with FU money?" Let's put it to a poll: https://news.ycombinator.com/item?id=5404986

I was hoping to get some statistics, but I was surprised by the overwhelming response.

pytrin
Yet somehow, FU money is not on the poll. So I don't see how that settles anything. A more interesting poll would have been to ask that question specifically.
eurleif
How does "You have enough saved up so that even if things blew up you could last a year or more" not cover that option?
pytrin
I lived on 2k$ a month for two years. I saved up 50k$ from contract work in order to accomplish that. I really don't think that counts as FU money.
niggler
My original statement (review the posts) was

"Many if not most entrepreneurs already made their FU money or already had a cash reserve."

It sounds like you already had a cash reserve.

pytrin
The examples you gave (Dorsey, Zuckerburg) pointed much more in the direction of the latter. Putting it the context of the original argument, I indeed put it all on the line by stopping to work completely and living a very barebone life. That's completely different from VCs who really have FU money and are not affected (or marginally affected) financially when their investments don't pan out.

Back to the poll, the option of FU money (enough so you wouldn't be affected by not working for a year or several) - is not there.

niggler
to make it crystal clear, the examples were:

- Dorsey was putting it all on the line with Square -- at that point he had his personal wealth secure thanks to twitter (already raised quite a bit of VC money and already paid himself).

- Bill Gates had family money in the form of a trust before microsoft was conceived.

- Mark Zuckerberg's parents were in the position to kick in money to Facebook (and in some accounts, they actually did, though I know neither of them and everything on the topic is hearsay)

- Bill Nguyen was already an accomplished entrepreneur by the time he started Color

In half the examples, the money was self-made, and in the other half there was familial support.

"That's completely different from VCs who really have FU money and are not affected (or marginally affected) financially when their investments don't pan out."

You are playing games here. Many VCs (especially some of the newer ones) don't have a track record and work hard to establish one by researching, picking whom they think are winners, and providing support. It's obvious today that investing in Facebook or Twitter at the pre-1B stage would be profitable, but it wasn't quite as obvious back then. And if a new VC has a string of losers, you can bet your bottom dollar they'll have a very hard time drumming up the next vintage.

Back to the poll, given the context (which I thought was self-explanatory) the option "You have enough saved up so that even if things blew up you could last a year or more" -- 169 votes at the time of this comment -- is the one that unites the aforementioned examples.

pytrin
You reached the max nesting with your last comment so I'll continue here - I'm not playing any games. If anything, I would say you are by not specifically saying "FU money" or something equivalent (i.e, being rich) in your poll and then claiming that being able to last a year qualifies. What does "blowing it up" means? it can mean a hundred different things. You obviously had something in mind when you wrote it, I read something completely different.

Anyway, I digress, this argument is getting nowhere. I got from your post and examples that you believe most founders do not put anything on the line when they're starting up. That's your prerogative. Lets just agree to disagree on that and move on.

tomasien
STRONGLY considering going on unemployment to start my next startup. I have about 10k saved, live the simplest life you've ever seen, and live in a city with amazing standard of living. I also have a good job, I'm just fed up not building something, and I want to try to build something amazing.

I've thought a lot about it, and my instinct is to feel guilty. I'm from a middle class family, have a great degree, and have great earning potential. I could get a job any time I wanted, and that's not what unemployment is for. However, trying to build a startup for 3 months that I believe could create hundreds if not thousands of jobs feels like its a good idea. The alternative for me is to start a company that is NOT a startup, one where I'm reasonably (50%) certain we can be profitable, but one that will not and could not scale (a service business).

Any moral advice here?

tomasien
Context on me: I started a startup that is well thought of that "failed" to become profitable in time to be sustained (because of unwillingness to change regulations in VA) given our extremely limited funding (<$20k) and all the shit we'd been through (http://tommy.authpad.com/the-one-year-anniversary-of-sleepin...) and so I got a coding job.

I have a lot of domain expertise organizing large people-based systems, built a profitable event planning business in High School, and am technical.

eupharis
The state of Oregon at least has programs specifically targeted at you. Basically, you get unemployment money while devoting yourself full-time to building your business. You don't have to apply for outside jobs. It's the "Self Employment Assistance Program."

http://www.oregon.gov/EMPLOY/ES/SEEKER/pages/self_employment...

I've heard the guys at Urban Airship in Portland made use of the program. They just raised $25 million in funding this past February.

From a tax perspective, it's a pretty enlightened policy.

ktrgardiner
These programs also exist and are active in Delaware, Maine, New Jersey and New York.
crazygringo
What is the program in New York? Regular unemployment requires that you be fired, and unable to find work.
niggler
http://www.labor.state.ny.us/ui/claimantinfo/specialprovisio...

It requires, though, that you collect unemployment for some time first

Spooky23
Also keep in mind that the NY max benefit is $405/week.

You could make this money part-time bartending and skip the red tape.

tomasien
Getting a part time bartending job is really hard where I live. If I could bartend on weekends, I'd make 50% of what I make now and that'd be plenty.
batgaijin
My advice? Don't be stupid. On unemployment you get access to quality services and healthcare.
dinkumthinkum
Why can't you work on this start up in your off hours? I don't see unemployment as a good option. It's not very much money. If you really wanted to do that, since you "great earning potential," why don't you save up for a few months and then try it? Although, I think the first option makes more sense in many cases.
tomasien
I have saved up. I think I made that clear.

I also am working on it in my "off hours" (after an 8-5 job, supporting other entrepreneurs in my community, and exercising every day how much time is that?) but I don't believe there's much evidence that's how great companies are built. How many great companies were "spare time" companies built by someone who wasn't in college (college is nothing but free time, whatever any student tries to tell you). Great companies are built on talent, process, and RELENTLESS EXECUTION.

I'm not saying unemployment is the right thing, but this is a MORAL not practical decision. Unemployment + my savings would be more than enough for my to relentlessly execute for 6 months to a year, which would be enough time to either validate or show I wasn't going to validate enough to get investment.

danmaz74
One suggestion, while you decide on leaving your job: take your "off hours" BEFORE your 8-5 job. You'll be much more productive.
dinkumthinkum
I read that you said you saved up. And I think the "relentless execution" stuff is great. Good stuff. But, you're talking about unemployment, so even though you have saved, if you can make all this money, couldn't you work just a little more save more than you'd get on unemployment. You realize that is not manna from heaven money It "ain't that much" in other words.

I get that it is potentially a "moral" and not a "practical" decision but it could a practical or legal issue if you are committing fraud to get the money, just a thought. But if you think that's the best choice for you; go for it, I guess.

nell
If you can do it on the side, I strongly urge you to take that route. Quit only when you are already seeing traction at your startup and requires your attention. Even at that point, see if you can take a short break at your current workplace.

Take extreme measures only when situation demands it. Do not force yourself into extreme situations especially if you don't have a backup.

It is good to have confidence. But don't let that blindside you.

tomasien
I feel like I should be clear here: my lifestyle is extremely simple. With my savings, even $600 a month would cut it for close to 9 months, 6 months without ANY decrease in lifestyle. Upon needing a job, I could get a restaurant job and continue to support my lifestyle or get a job in my field within a month at most.
tomasien
Why I don't want to do it on the side I answered in the comment below you, but I don't believe that's how great companies are built. And that's what I want to build.

On the side I've built, and have either launched or (in QuickRamen's case ready to launch):

Quickramen.com Letterlasso.com Traxi.co

Helped with Coffitivity.com (200k users in 3 weeks)

Added to cityswig.com relaunch (my old startup, relaunching this week)

None of which have the potential to be huge or great companies. I want to build something great.

pseut
(I'm an economist, not an ethicist or a lawyer)

Morally: you've paid into unemployment while you worked and you're cutting short the safety net you'll get if the startup bombs and you have to look for another job later. You're probably internalizing enough of the downside that you can take unemployment with a clear conscience.

tomasien
My sister said the same thing actually
pseut
One more thought on this: no one on unemployment is obligated to take the first job they can find. Part of the reason for unemployment insurance is to give people time to find a job that's a good fit. In the broader sense, that's pretty much what you say you'd like to do by trying the startup.
sliverstorm
Would that actually work? I thought for UI, there was some requirement that you be actively pursuing employment in your field.
alaskamiller
In California you're not allowed to be starting your own business while on unemployment. They ask you multiple times if you understand such clause from your unemployment handbook. It's a social security seen to get you back to employment as soon as possible instead of being a subsidy to your entrepreneur lifestyle.

That said, I hear all kinds of stories about people on unemployment. Ranging from someone that's managed to be on it for over a year and a half, traveled to Thailand for eight months.

It's a lenient system and you're the one that has to sleep at night so you make the call.

mtrichardson
Same restrictions on normal unemployment apply in Oregon. The SEAP is unemployment, and requires that you be on regular unemployment first. The differences are that you're specifically allowed to work full time on your company. The company has to be vetted to make sure it's not completely ridiculous, but all profits you make are yours. It's a fantastic lifeline and without it Urban Airship would definitely not exist. It's also a federal program (as well as federally funded), though the states run it - in other words, California could implement it. They just haven't.
flyinRyan
> It's a social security seen to get you back to employment as soon as possible instead of being a subsidy to your entrepreneur lifestyle.

Wow, that's infuriating. As if employees are great contributors and making a business isn't... Where do they suppose these jobs come from to begin with?

alaskamiller
J. K. Rowling said she wrote Harry Potter while on unemployment. The UK system doesn't sound like it's meant to be subsidizing entrepreneurship either, rather it's social welfare.

But Rowling classified her unemployment checks as the best investment the country's ever done given how she's earned billions of taxable income.

Though for every Harry Potter there are millions of not so successful attempts. Others may find it infuriating you're spending their, and obviously yours and your employer's, tax money on hair-brained Kickstarter panhandling ideas.

flyinRyan
As I said elsewhere, most of the big discoveries we've had throughout history came from people who didn't have to spend most of their time providing for their survival. Some people, indeed may be infuriated about "their" money being used on ideas they don't believe in. But I consider this a vindictive view (i.e. "I have to work at a job I hate, so everyone else should suffer too!") and not worth spending a lot of time worrying about.
jpdoctor
> Ranging from someone that's managed to be on it for over a year and a half

That was possible only during the recent financial meltdown. Benefits in normal times are 6mo (US will likely return to that in the next year.

mountaineer
> STRONGLY considering going on unemployment to start my next startup

One doesn't just "go on" unemployment usually, right? You have to be laid off usually. Quitting does not usually qualify. But, I guess it depends where you are and the laws there.

dlitwak
I technically got laid off from the previous job before I started Mozio, my startup. I qualified for unemployment, but declined it. I graduated debt free from UC berkeley and was born into a well off family and my unemployment was on purpose in the search to make myself much more wealthy, and it didn't seem right to take public money to do that. I understand that te prevailing sentiment on this thread is that entrepreneurs would add more value than an employee and so therefore are entitled to the benefits just as much, but for me it was personal: I looked at myself and my family situation and thought that it would be greedy and bad karma, and not how I wanted to launch my career. I had already been given so many advantages in life that I didn't think it was necessary to be unscrupulous and repurpose a government program like that.
brianr
First one: dropped out of undergrad, if things had totally failed going back (with financial aid) would've been an option.

Current one: ~1 year personal runway saved.

brianmcconnell
This was a long time ago. I funded my first startup doing consulting work writing IVR software for an "audiotex" company (I told my friends I was a phone sex repair man). While it was a colorful client, they were the best consulting customer I ever had. Paid well, and paid on time every time. Also got to travel to interesting locales such as Guyana, Nicaragua, Italy, etc. (And yes the people staffing the phones were not attractive, and more than a few were men).

I guess that counts as prostitution.

krohling
Sold my car, cashed out my 401K. That was 5 months ago.
anonfunction
How's it going? I'm selling my car in the next weeks and moving to SF to work at my first startup and I'm really excited. Any advice for a 25 year old hacker going into business?