Ask HN: What has your startup venture financially cost you?

https://news.ycombinator.com/item?id=713489

by sdesol • 17 years ago

9 8 17 years ago

news.ycombinator.com

I've been working on my project for over a year now, and I've reached the stage of pondering what this venture has cost me so far. When I first decided to take on this project, I was sure I would have had something presentable by Christmas time last year, but here we are past mid July.

I'm happy with what I have so far, but after reading the story about Sampa and how it failed, I've found myself wondering what this has cost me.

I've turned down jobs that would have paid 6 figures and it looks like I'll be going into debt in a few months to pursue this even further. This isn't all gloom as I have an amazing opportunity in the next couple months that can really open a lot of doors, but like the story of Sampa, failure is never all that far away.

What I would like to know is, can others share stories of how they have sacrificed financial stability to chase a chance. The happier the story the better :-)

vaksel• 17 years ago

About 1.5 years of my life without a job(I make a few hundred here and there each month with affiliate $$$/stock trading) On top of that, used up about ~$15K or so from my savings

Would have been a lot more, if I hadn't moved back with parents to cut down on expenses.

SwellJoe2• 17 years ago

My previous business was a much harder slog than the current one (which has never had any significant hardships, though I learned to live very frugally from my previous venture, so I don't need to make much money to avoid hardships or debt).

At one point, about two years in, I had burned through over $40k in savings (I invested in the stock market in 1996, and sold almost all of my holdings in 1999 before the bubble burst) and I was over $30k in credit card debt, and with several bills unpaid for two or more months (let's just say I learned exactly how long it takes for various services, like power, water, etc. to be cut off; and I also spent a little time learning about foreclosure rules; juggling which bills you will pay each month in order to maximize runway is pretty stressful, I recommend against it).

Part of the debt was spent on inventory, and it was paid back quickly (within about 90 days), but it took over a year to pay the rest of it down to zero. I had to add consulting revenue to my startup revenue, which was a distraction, but also a much needed rest from going it alone on the startup.

I don't have anything particularly happy to give you. The startup never really took off, but it did (along with about 50% consulting business mostly in the same field as the startup) become comfortably profitable, bought me a new 350Z, paid the mortgage for five years, and equipped a nice home recording studio. I don't have many desires for objects, but the ones I do want tend to be expensive, so I guess I lived pretty well those last couple of years running the business that got me in so much debt.

Rather than platitudes, I'll give you some advice that I wish I'd known back then:

1. Don't go into debt more than you know you can pay off in a month. It's not worth the stress. If you run out of money, and can't raise it from others, pause the startup, do some consulting or get a real job, and pay for it out of pocket rather than with plastic. Cut expenses mercilessly to avoid debt; part of why I started doing well at the end, and have continued to do well throughout starting the new company is that I have very low expenses. If money doesn't go out, you get more runway, even if money isn't coming in. I sold my car when I moved to the valley, by the way, so my only big expense is now housing.

2. Do not go it alone. It is too stressful. I'm a loner by choice and temperament in almost everything. But, if you have no one to share the startup stress with, you will burn out badly. I have a partner, and now an employee, and I'm finding the burdens much easier to handle.

3. Raise money before you need it, or figure out revenue as early as possible. There are two good ways to build a business and one really bad way. The good ways are: On investor money, or on revenue. The bad way: On personal debt.

4. Understand the costs, and embrace it. Startups cost more than money. They mostly cost time, and the opportunity cost of other jobs you could have had. If the benefits of having your own business don't outweigh those costs, you might consider working for someone else. It usually takes years to get to the point where you make as much working for a startup as you would make working for someone else, and most businesses, even those that do not fail, never make the founders rich.

5. Never be without health insurance. In the US, you simply cannot afford to get really sick or injured without coverage. If you are a young, non-smoking, male, you can get good coverage for under $100/month. I think I pay ~$100, and I'm probably older than you and California has higher health insurance premiums than many places.

ScottWhigham• 17 years ago

Oh wow - you know, each to his own, I guess. If you aren't willing to go into debt more than "you can pay off in a month" then you either need investors or you need to get used to making money off of AdSense only. For a startup person, you can likely only afford to pay off $500 in one month from profits lol.

As for, "2. Do not go it alone", I say to do what you want and do what works for you. And for, "3. Raise money before you need it", I'd amend that to say, "Be very careful about raising money. You are no longer your own boss."

Like I said - to each his own. OP, I'd just advise that you read more than one person's post before you make decisions. We're all different and each of us define success in different ways.

SwellJoe2• 17 years ago

Did you miss the part of the story where I was $30k in debt? I think you must have skipped over most of my post.

And for, "3. Raise money before you need it", I'd amend that to say, "Be very careful about raising money. You are no longer your own boss."

Your reading comprehension is sorely lacking, it seems. The rest of the sentence was "or figure out revenue as early as possible". I'm not sure how you could possibly assume from what I wrote that I'm encouraging people to raise money rather than run on revenue.

jerryji• 17 years ago

I second SwellJoe's advices, particular #1 -- "Don't go into debt".

During 1999 the pre/post bubble period, I committed 120% into an online game startup with a few of my friends. Even with a bit of VC funding, the business finally imploded after struggling for about two years. Not a cent of salary was paid during the second year, and since we were all fresh grads with virtually no savings back then. We all had to max out our limited credit lines even while living _very_ frugally (sleeping on my friend's couch and not paying rent, for example). The pressure of debt was suffocating every minute and finally left me life long deep scar both mentally and physically. Besides, under prolonged period of stress, I ultimately started to make crazy decisions, and startup is a fragile organism that can not afford any more mistake.

That's why now I only work on my project part-time, even though it's been almost three years with little progress.

sid• 17 years ago

I see it like this. To start a business, whatever it is you need time, money and skill. However if you have 2 of the 3 your still capable of succeeding.

If you have money and time, you can pour in those 2 aspects to get the best managers, engineers and designers

If you have money and skill for whatever industry your in you are able to be the visionary, the lead, be in control and are able to fill in your short commings with the funds you have. If you need the best materials, resources you can get them. You dont need to think twice about making do ... (to a certain extent)

If you have skill and time then you yourself can build and design whatever it is your out to achieve, you can manage and you can empower the people you think can help you to make your business succeed even though you are not yet paying them. However you need to think more carefully, negotiate more because money is not in abundance so in a way its a good thing cause it forces you to be more resourceful.

So far we have spent, money on servers (1 year upfront), test equipment, business registration and various other paper work costs to get a business started. This has probably all totalled to about $7000, not so much i guess.

But my partner and i have negotiated a pay cutt (cause we still need our day jobs but we also need the time aspect so we dont do a full 5 day work week) with our managers so that when im at my 9-5 my partner is working on our business and when his at his 9-5 im working on our business and that we also get a day where we can catchup on the work we have done.

There is also the 3-4 hours everday after the 9 to 5 that we spend working into the night (which means we cut down on alittle bit of sleep)

There are times when we cant go out when we want to cause we are close to a milestone and its just not a good time to leave even if we want to. These are not finacial costs but arguablly some are more important. I guess we have spent alot and in terms of time its been quite abit.

But i guess thats the sacrifice of starting a business. If its not money and time, its going to be skill and money and if its not skill and money its going to be skill and time.

Its got to be one of those combinations.

I guess

darwinw• 17 years ago

Long story: I started really small. I paid around $20/month for a shared hosting when the site is really small (separate app server and db server) and not a lot of contents. my amazon S3 bill is even smaller. Later on when the site outgrows the shared hosting, I used EC2 to get two small isntances (for both app and DB server). Bottom line is the $$ i get from banner is able to pay for the bandwith and hosting. The only extra I pay for is $150 a month for google adwords to drive traffic ($5 a day budget).

Short version: Adwords for $150 a month (I've been paying for this for a year)

nailer• 17 years ago

$AU 25,000, before I realized that employing other people who were more experienced as web developers was harder than learning web development myself (I have a hardcore Linux background, with no experience of the web until the last two years).

Fortunately I have a decent job and paid off the debt. I've integrated Python into my day job and get to spend most of my time coding. Interestingly, the quality of my work as an IT architect has gone up - I've been playing with SOAP, XLWT (Excel API), PyOFC, Django, etc. for a variety of networking, reporting and automation tools for customers.

Ask HN: What has your startup venture financially cost you?

Related Stories