Tell HN: My startup is making money and I don't know what to do

https://news.ycombinator.com/item?id=7954905

by sthielen • 12 years ago

211 128 12 years ago

news.ycombinator.com

I started University Niche[0] with two friends to help college students find places to live off-campus around their universities.

If you've been through the college system in the US, chances are you know how difficult it is to find a house to rent. Many landlords will simply hang up the phone the second you tell them that you're a college student. University Niche is a database of rental properties that are open to renting to college students, with information curated specifically toward helping students find the best places to live.

We launched April 2014, and are now at three universities. We've seen a lot of success (~40% w/w growth, 100%+ m/m growth).

For many students, this is their first time living on their own, so we wanted to sell ad space to small businesses that would help students with their move (storage, furniture, etc.) and then to small businesses that would help them once they're situated (grocery stores, gyms, etc.). I coded up a basic self-serve advertising platform, and my cofounders and I went and found a local moving company. Walked in the office, talked with the owner for about 15 minutes. Sale.

Went to a mattress store. Sale.

Small restaurant, same thing.

We've walked in to six random businesses, and only one said no.

So we're pretty excited it works, but we have bigger plans than this. We have projections and budgets to expand to 150 schools nationwide.

We know how we're gonna do it and we know how much it will cost, but we are all at a loss for how to take that next step.

We have a validated product and now a validated revenue model. We've got traction. But we don't have the funds to take this thing to the next level, and we don't know how to meet the people who can help.

Anyone have any advice or been in a similar situation?

[0]http://universityniche.com

ASquare• 12 years ago

Perhaps you're ready for Series A: http://avc.com/2014/06/what-seed-financing-is-for/

sthielen14• 12 years ago

We've never raised money before this. We definitely want to do some kind of seed round, but we don't really have the connections to find the right people.

We're all new to this game. We went to a few "pitch nights" back in March when all we had was an idea and a barely functional MVP, but they're all really theatrical and honestly we'd rather just sit down and talk with someone. We just don't have a clue about how to find those people.

rhizome2• 12 years ago

Why do you want to raise money (i.e. sell part of the company)? It sounds like you can grow organically, maybe raising your prices is in order?

illini1232• 12 years ago

Have you raised a family and friends round? What amount of capital are you looking for? If you just launched 3 months ago, I'd say seed level, but I don't have enough specifics on what you need / burn rate to judge.

Depending on where you're based, I would look at getting in touch with some of the angel investing syndicates. Also, be realistic about the runway you're giving yourselves. My personal philosophy is to meet with investors in my network right at launch (not for money, but to alert them that I might be coming to them at some point). These relationships take time, and even an angel investment can take a month or more for due diligence. Expect Series A to take months longer.

Given that you're not currently in touch with angels, I would start identifying 1-2 groups in wherever you're based (I hope the answer is a larger metro area). Find out if you have a mutual contact. If not, and I hesitate to say this, but make a cold call to the angel / angel group. You don't have anything to lose.

sthielen14• 12 years ago

We haven't raised anything. We're three broke college students who have been putting everything we have into keeping this thing going.

We're planning to expand to 150 campuses and bring on some people to man the phones/maintain our property listings, as well as hire campus reps/brand ambassadors at 20 key schools from that set of 150. Our 1y budget for all of this is <1M.

And yeah, we're based in LA, but we're all new to this and don't exactly have any connections with anyone in this industry, so we'll definitely start researching some groups and, I suppose, calling until someone wants to talk to us.

Thanks for the advice!

illini1232• 12 years ago

First things first, get an advisor. You need someone whose been down this road before to mentor you. Not to downplay your intelligence, but as I decided to launch a company this summer, I went through to all the individuals in my network that could at least give me advice when it came to operations, growth, product development, etc. Although it happens less, there are times where startups fail because they balloon too fast.

Based out of LA: https://www.techcoastangels.com/

http://www.maverickangels.com/

https://angel.co/los-angeles/investors

Also, you may want to check here: http://thefunded.com/

This offers reviews of investors / investment syndicates. I can't speak to its accuracy, but it will at least provide some context.

Good luck.

webmaven4• 12 years ago

Do you really need to roll out to 150 campuses in one year? Use the profits from your first to roll out to a 2nd, then use the profits from 1+2 to roll out #3, etc. BTW, for each new city you roll out to you should be trying to figure out how to do it better.

When you've proved you have a repeatable, scalable model, you can take on investors to accelerate the growth.

This is more or less what FB did.

JoshTriplett• 12 years ago

What do you plan to do to "take this thing to the next level", and how much money do you need to make it work? The scale will determine what route you go; needing $10k is very different from needing $10M.

thedmitry• 12 years ago

Contact me, I can help - http://about.me/dmitry

hoopism3• 12 years ago

How do you plan on replicating in the new cities? Is the unique element in this equation (it's certainly not the space that is novel) you and your team?

Track record goes a long way. You've proven to be effective in a very small 'niche'. You may want to consider taking seed (if needed) from F&Fs and then prove it in another city. You may find that expansion step to be useful. It will also help answer the question of expansion for potential institutional investors.

sthielen14• 12 years ago

We're actually at three schools in California--Loyola Marymount University in Los Angeles, Chapman in Orange, and the University of San Diego. We've been able to replicate our success pretty similarly in three unique areas, and have plans for Campus Reps/Brand Ambassadors to help us out "on the ground" at some of the larger schools we're planning on targeting.

hoopism3• 12 years ago

I didn't mean to sound dismissive. I think the early success is great. But I anticipate that the biggest question is going to be "will it scale?". Investors know that it's trickier than 1m+ bucks and some ambassadors. So if you can prove out that you have a model that works (and actually prove it to yourself) then you eliminate a big barrier in funding.

This is not a new model. The issue is it's VERY hard to scale. Proving it as much as possible before walking into a pitch will change the dynamic drastically.

You may also find that it does not scale as well as you hopes... or that managing college kids and relying on them to grow your business is not always reliable (that's a tough one).

jonlucc• 12 years ago

It seems like your biggest hurdle might be getting local advertisers in an area. Maybe I don't know anything about small-scale ad sales, but I would think that part of the business would really benefit from having local/regional people doing ad sales. Do you have a way to get around that? Is it a solved problem that I just don't know about? For that reason, it seems very obviously simpler to grow into regions, maybe not expand to the whole country at once.

Edit: I would have killed to have this service when I was in college. Props for making it work.

gamerDude• 12 years ago

1) Check online for investors. Angellist would be a great place to find Local Investors interested in your space.

2) Search online for angel groups in the area and go talk to them. See if anyone in that group is a connection somehow to do a warm call instead of a cold call.

3) Tell your friends and family what you are up to and ask them if they know anyone that is an angel. If you find an angel that isn't interested in your industry, they probably know other angels, so you can ask them to reach out.

4) Ask the university for help finding people that are investors. They would probably love to help and have a success story come from their college.

state• 12 years ago

Just grow the business. You can "take it to the next level" by just making money and reinvesting it in the company.

late2part4• 12 years ago

Another way to look at this is that you can meter and invest in the risks and opportunities regarding your upside and your downside. If you over-invest in your upside optionality, you may risk big downside. If you are too conservative, you'll limit your upside. Only you can figure out the right risk reward balance.

RamunasM• 12 years ago

Awesome idea. I'd love to have a site like this in my country

cglee• 12 years ago

First, decide if you really need to raise money. Can you bootstrap (ie, self fund) your business? Too many people immediately go for capital when they don't need it. It's extremely distracting and not all that necessary. You should only look into raising capital if you have a capital constrained opportunity or problem. So many problems initially look like money problems, but they're really disguised as something else (culture, product/market fit, market timing, etc). Usually, it's best to really get to know your market really well first, before reaching for funding.

Second, make sure your legal documents are in order. Incorporate, if you haven't already, and open up a business bank account. Make sure to use your business bank account for all business related expenses. This will make accounting much easier down the line.

Third, hire a great bookkeeper. Trust and loyalty is really important here, so best if you hire someone who is somehow connected to you.

Fourth, hire a great accountant. Some accounts will also do bookkeeping for you. I don't think this is a good idea, as you typically want someone "on your side" watching out for your day to day finances. Intelligence and industry expertise is really important for an accountant.

Fifth, if you're making real money, it's important to put some words on paper about how the company ownership is divided, and other "what if" scenarios. You typically also want some sort of Operating Agreement between the founders. Usually this document covers: 1) ownership division 2) provisions for terminating members 3) provisions in case of long term disability or death of a member (for example, do you all of a sudden want your cofounder's spouse or parents as your cofounder in case of death? Look into "key man" insurance.) 4) provisions for adding new members

Some people say get a lawyer for these documents, which isn't a bad idea, but most of these types of documents at this stage is pretty boilerplate. If you have some unique circumstance, like an international cofounder or something like that, then perhaps consulting a lawyer is best.

ixmatus2• 12 years ago

Getting into an accelerator or incubator (even if it's one that's not popular) can really help with the legal stuff since you'll be able to get more advice and they will always have those boilerplate docs for you.

Form a C corp in Delaware and get the ownership figured out ASAP. I also generally think that all of the founders should vest (no cliffs or anything, but a four year vest for everyone will keep the company safe in the event one of you leave, even the CEO).

I agree with cglee's comment that you don't need capital right now, get more traction and build more product. Then in six months revisit the topic and determine if your organic growth is enough to sustain further growth or whether you'll need capital injection.

Raising money, btw, isn't always just about the money - if you pick your investors correctly they can help you and your business tremendously.

rexreed• 12 years ago

Agree with the above - altho forming a Delaware C Corp at this early stage is not necessary. It's become much easier now to form an LLC in your state of residence and convert at a later stage (if at all) to Delaware C if you end up raising money.

sthielen14• 12 years ago

We've been bootstrapped since the beginning, but, as much as we don't want to admit it, we're starting to outgrow what we can do as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away.

We have plans to expand to 150 schools across the country, and if we do that we project to be cash-flow positive within 6 months. But right now we don't have enough resources to expand to even 10 schools and try and maintain that. And especially with how our demographic (college students) respond to word-of-mouth with services like these, we really want to be available to as many students at as many campuses as possible before we lose any "buzz" that we're cultivating (either organically or through marketing efforts).

With regard to legal documents and accounting and all that, we have an LLC right now, with Quickbooks and a boilerplate operating agreement that I found in a book at Barnes and Nobles. I definitely agree that it is incredibly important to be on top of the legal side of things, but we honestly don't even have the money for that right now.

rwhitman2• 12 years ago

Being on the HN frontpage is really going to expose you to both opportunities and competitors. Taking funding is probably a winning strategy for you right now

danesparza2• 12 years ago

"as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away."

Bootstrapped = your profits are able to grow as your company grows. It sounds like you have an expensive hobby at the moment. Either scale back your operations so you're profitable or grow your numbers.

Blahah• 12 years ago

Why not grow at the rate you can sustain? Rather than taking on 150 schools, grow by as many schools as you can afford with the profits from the initial set.

the_watcher• 12 years ago

Piggybacking on some earlier comments, the "sell ads to local businesses" model is a tough one to scale (using the common startup definition of scale to mean "grow exponentially"). However, that doesn't mean you can't grow your business into a nice little income source that, ideally, won't take much management (since your users are college students, people who move often, and a market that has a built in supply increase every year, if your service works for them, advertisers who see a benefit will likely continue to pay you once they are onboarded). You can probably get to this point (focus on the top 10, then 25, then 50, etc. colleges in terms of student population - I'd look at new student population, to be honest, as well as adjusting for % that live in non-university housing).

From your comments, I don't think you should worry about trying to join an accelerator or get a largish amount of funding - that will just push you to make the Groupon mistake and spend too much money on local sales. My recommendation - see if you can raise money from friends, family, your university, or any local entrepreneurship groups (in Austin, for example, there are several organizations that exist nearly entirely to help students get through the part of founding a company you are in). From there, were I running the company, either you or your cofounder should shift entirely to onboarding schools (or hire someone to focus full time on this if you each are actually needed on other projects). Create a "college rep" program, and offer either a small stipend (college students will work for tiny amounts of money, especially if they can then put "worked at startup in school" on their resume) or in kind services from your advertisers (half off mattress, free move, whatever they'll offer to you). Build quickly from there, and keep promoting it. If you're business model is real, it will become apparent quickly, and you can think about raising real money then.

ProblemFactory• 12 years ago

With regard to legal documents and accounting and all that, we have an LLC right now, with Quickbooks and a boilerplate operating agreement that I found in a book at Barnes and Nobles. I definitely agree that it is incredibly important to be on top of the legal side of things, but we honestly don't even have the money for that right now.

The main benefit of having shareholders and operating agreements is not in having a piece of paper, but having discussed and agreed on the principles with your co-founders. A boilerplate agreement is entirely useless, unless you all have thoroughly read and understood, and agreed with it.

Instead, I would recommend sitting down with everyone one evening, and coming to a mutual understanding about questions such as:

* How is ownership currently split between co-founders?

* How much do you pay yourselves salary? How should this change in the future depending on revenue or investments?

* Under which conditions would each of you consider selling the business, versus keeping on growing it?

* Who is allowed to purchase stuff with the company account, and when do they have to confirm it with the others?

* If one of the co-founders decides to quit (fantastic job offer, just tired of the startup, etc), what happens to their ownership? Do they keep all of it, lose all of it, or keep and lose some parts depending on time with the startup?

* If one of the co-founders doesn't quit, but just takes a side job, starts ignoring you, or becomes an asshole, are the others allowed to fire them? What are the share ownership outcomes of that?

* Are the owners allowed to sell their shares to outsiders?

* What happens if one of the co-founders dies or becomes disabled and incapable of working? Do their relatives inherit their ownership (this is probably the default!)?

One of the main causes of startup implosion are co-founder fights, and these in turn arise from not having discussed these issues beforehand. It's best to do it before the problems arise, and before there is serious money on the line.

If you have actually debated these questions, you are already ahead of many startup teams. You can also just write them down in plain English on a single sheet of paper with everyone's signatures - that will count as solid evidence if it ever goes to court.

And if you have plenty of cash later on, you can take that sheet to a lawyer to get a "proper" agreement. After all, a lawyer cannot and will not tell you the answers to these questions - they just write up what you have decided in more detail based on local laws.

mrfusion• 12 years ago

Can you expand on the bookkeeper idea? What would their job entail? Can it be part time? Any tips on finding someone?

peterjancelis• 12 years ago

You should sit down with the team and work out the unit economics per city.

This will give you a tangible and precise target for what it takes to make the next city profitable. (E.g. "70 apartments available, 4 ad sponsoring business for break even.")

Once you have that you can do like all franchise models do, reinvest your profits organically for company-owned cities and let franchisees come in to fuel growth beyond that, with the process manual based on the cities you did yourself.

You got to where you are by focusing on just the client. Think hard before spending time trying to play the venture capital game.

alexsherrick• 12 years ago

I have a few associates that would probably invest in this type of company rather quickly. Drop me an email if you want me to pass your name along.

rainer89• 12 years ago

i can accept it , and invest in giving scholarship and fund projects to students in my country , and train them, so after that you can had low cost and happy human resources happy to work with u, invest in train people

ChuckMcM3• 12 years ago

Are you paying yourselves salaries? Do you have an actual office? Benefits? etc? I would suggest that you not get ahead of yourself with "making it big" and instead focus on making it a solid business. Get to the point where you're paying yourselves and everyone who works for you a market rate salary and benefits, and you have office space, and you're cash balance is growing. Basically this is the classic definition of being 'profitable' (you have net income). Then hire a CFO.

The CFO will help you organize your thoughts around how much money you make and need to make in order to maintain a level of profitability. Then take your net revenue and feed it back into the business, pick up your next campus. Work on the process for organizing a campus, what you need to know who you need to contact. You will be able to start hiring sales people. These people should be paid based on advertising sales delivered, not 'leads generated'.

Once you've got your next campus, quickly post mortem what went well and what didn't. Then move on to the next one.

As you add campuses your revenue stream will increase and you will be able to add additional engineers to help integrating the data. Every million dollars a year in revenue shines more light on what works and what doesn't in your business.

Have fun, enjoy the experience of all the things you are learning, (even the bad things teach something).

sthielen14• 12 years ago

No salaries, no office. My two cofounders and I have been throwing everything we've got into this; we're all broke.

Our business model requires people actively maintaining property listings at each school, and then growing student traffic at that school and then, once we're established, securing advertisement deals.

Our rationale behind raising funding is that we can either cut corners and struggle and keep adding one or two schools a month until it's simply impossible for three people to maintain, or, with a little bit of money behind us to do our own advertising, have someone making cold-calls to collect properties, and have a student representative on the actual campus helping us brand locally, we can streamline the process and achieve the kind of wide-spread adoption we need in order to secure large advertising deals (right now we target our placements toward local businesses, but once we are established we'll be able to secure deals from places like banks or office supply retailers).

will_work4tears• 12 years ago

How are you currently finding ad deals at other schools? Have you thought about affiliate style sales? You promise a cut to affiliate members of those ads to the member that brings in the ads. Maybe too much overhead tracking all of that, though.

ChuckMcM3• 12 years ago

Well that helps clarify the question considerably.

   > No salaries, no office. My two cofounders and I have 
   > been throwing everything we've got into this; we're 
   > all broke

To put it nicely, "So what?" (I know that sounds cruel but trust me it isn't) What you have is a bit of traction, you don't actually have a business yet and as such its probably too early for any but the most inexperienced of investors to invest in you.

You know you need more than the three of you, but lets focus on one school for the moment.

You need a "listings manager", a "sales person", a "student rep" for a school. Lets say your "unloaded" salary pool is $100,000/year (that is salary but not benefits cost[1]). You'll need revenue from advertising at that school to exceed $100,000 annually. Since you're just proving this out you three can presumably "play the role" of the three people you would hire here to do this. So you need a minimum of $8,500 per month in advertising revenue. You should target double that or $17,000.

Once you have one campus working, where it is paying more than enough for your three "campus specific employees" then you can start to think about investment to go further. An investor is going to ask you questions about "What does it cost per campus? what can you make per campus? What are the limits on that?" you will need to have really good answers to those questions which you don't currently have.

[1] This is a 'swag' or scientific-wild-assed-guess on an number, I based in a student working part time during the year getting about $10K/year (1000 hrs @$10/hr) A sales person being paid mostly on commission ($30K/year + 10% commission for $10K out of the advertising sales, and your listings manager making $50K a year straight up) You should adjust those numbers based on your own experience/insight

sliverstorm• 12 years ago

Right, that's exactly what Chuck is advising you to not do. You have your sights set on the stars; "How do we land big advertising deals", "How do we spread to lots of different campuses fast". Chuck is advising you make sure you can walk before you try to run :)

To throw in my 2c, you shouldn't have to land the huge advertising deals and spread to fifty campuses just to make enough money to pay the three of you guys. If you require a nationwide presence just to make enough money to pay three salaries, the business doesn't work. But it doesn't sound like that is the case, so it should be doable to reach a level of income where you can pay yourselves without expanding too much yet. Then grow.

anoother• 12 years ago

Now that you're established at a couple of schools, I wouldn't look for local 'establishment' everywhere you plan to expand to.

I would map out 4-5 new areas for your business to expand to -- if possible, try and optimize for expected ad revenue (ie., ease of getting advertisers on board) and student base, housing availability, etc.

Then target businesses in those areas, emphasizing you are already highly successful in other areas and will be launching locally soon. Get some testimonials from your current advertisers to help convince new ones.

In short, get ads on the site (=> money in the bank) before you have accommodation listed. Launch new areas with a 'coming soon' page. Build up a buzz amongst students about your product. Register sign-ups to gague interest, and use these to attract advertisers and landlords ("Hey, look, we have 400 signed-up students, just waiting for us to launch here!"). Make people impatient for it. Then deliver the platform.

Rinse and repeat, as quickly as you can (but not so quickly you'll run out of money, or fail to deliver).

Offload as much work as possible onto your users. If you're currently curating or creating property listings, get landlords/estate agents to advertise their own properties instead. Show them how Niche will be a one-stop shop for the majority of students looking for accommodation.

Once even 1-2 estate agents in an area have tenants who 'found' them through Niche, you'll have enough credibility that business will come to you instead of you having to chase it. Encourage this local credibility to snowball nationally as you spread out further, through testimonials, blog posts, social media, well-timed interviews with local newspapers, etc.

factsfinder• 12 years ago

First of all make an app on Android and iOS platforms. Then give your venture a piece of advertising. Meet a bunch of investors, convince them , choose the best of them that suits your needs and get it done. Soon you can be a billionaire. SO what are you waiting for just do it already. Thank you :)

rwhitman2• 12 years ago

To have such a slam dunk in the apartment rental space, and such big wins selling advertising to small businesses so quickly, thats huge.

I've met so many people over the years struggling so hard with products trying to get in on this market and never making a dent.

The product design is top notch too. No wonder its a hit. Congrats

santoshsankar2• 12 years ago

While everyone has suggested bootstrapping, friends and fam, local angel groups and Angel List, have you tried your university?

Many large public institutions have launchpads and accelerators (they just don't always market it well). This could be a natural fit for them.

I think like most people are echoing, continue to fund it out of pocket (maybe with the help of family) to get it to be the best product possible. From there, slowly build out into other geographies. You can learn lessons from your early expansions so as to not repeat it. Given the product is still young, there is likely a good amount you can build on prior to scaling out.

Good luck and will def be monitoring University Niche

gibbonraver• 12 years ago

By a margarita machine.

sumedh• 12 years ago

Is there a joke in here somewhere?

_random_• 12 years ago

The Silicon Valley show reference.

sbashyal• 12 years ago

First of all, congrats on your success.

I am based in Los Angeles and I currently work in the apartment industry. I can meet with you in person and provide you guidance and possibly help you raise seed money if you choose to go that route.

Send me an e-mail to my user name at Google's e-mail service.

mikekij• 12 years ago

First, congrats. Having real revenue probably puts you in the top 5% of startups already. Great work.

- Incorporate. You want the legal protection of (at least) an LLC.

- Really think about if you need to raise money. If you do, it should be easy to raise $100k-$200k with real revenue and traction. But it sounds like you're in a position where you could actually bootstrap this. Equity is expensive. Think twice before raising money.

- Think in terms of milestones. What can you do to get to $XX,XXX in revenue per [week,month,year]. Then, what can you do to launch at an additional school while still staying cash-flow positive? This sort of thinking breaks the process into bit-sized chunks. Much easier to digest.

- Your biggest problem will likely be scaling the ad sales efforts. Walking into local businesses works great for 1, 2, 3 schools. But it will be hard to scale that to 100 universities.

I'd love to help out in any way I can. I started a company in grad school that I sold last year. I've been through many of these issues before. mkijewski at g mail.

giarc2• 12 years ago

I'm thinking they should set up school representatives. Post an ad at each school they are interested in. Have a 3rd/4th year student at each college who is familiar with businesses that are particularly keen to attracting students. They know the student area's and housing issues.

davidhariri• 12 years ago

keep.... going?

oniTony• 12 years ago

We've seen a lot of success (~40% w/w growth, 100%+ m/m growth).

This _might_ be, in large part, seasonality. Once the school starts in September, most of the target demographic would have already found _some_ place to live for the school year.

sthielen14• 12 years ago

Oh, absolutely, the business is incredibly cyclical--that's something we did a lot of research about before starting. The housing market is in full swing Apr/May/Jun, but students are still looking through September. Then it's going to die down a bit until December (though some will be coming in the middle of the year, or returning from study-abroad), and people start looking again as early as January.

We plan to use the downtime in our cycles to promote and brand ourselves through our blog and things like that. We want students to know about us before they even need to use us, and we're doing that by selling the "off-campus lifestyle" and glamorizing the idea of getting out of the dorms and living on your own.

(Unfortunately this involves writing up a bunch of mindless top 10 buzzfeed style lists)

trumbitta2• 12 years ago

Sorry if I sound naive, but I was a college student myself not so long ago and... I stayed at the same place even when I hated it, just because it was so difficult until Apr/May/Jun to find a better one.

Enter your service.

Difficulty starts going down, business starts being less cyclical. Who knows how much less?

santoshsankar2• 12 years ago

Another thought-- Since there is all kinds of advice coming out of this which can be confusing / hard to parse, here is a slideshare on raising seed capital. It reflects what almost everyone is saying to focus on product.

If you need funds to help that happen, try an Indiegogo / Kickstarter / etc. This is a serious problem so it could see some interest

http://www.slideshare.net/schlaf/raising-a-seed-round

11thEarlOfMar• 12 years ago

Have you gone back to the businesses you've sold to to see how much traffic or actual $ sales have been brought in by your service? If there is a measurable and verifiable ROI for them, you have a powerful lever moving into new markets. Those testimonials would be priceless.

What I would think about is recruiting commission-only sales persons in new markets rather than trying to go manage them yourselves. Likely, you'd use other college students. Start with another local school so you can jump in if necessary. Write up a 'how-to' guide with marketing materials for the prospects, and then look for self-starters who will go do the selling on commission only. Do some training. If they are empowered with testimonials from businesses who have seen a real return, they will find it as easy to sell as you did.

So the question is: can a single sales rep, likely a college student themselves, make enough money selling ads for you that it would be worth their while?

The goal is to get cash coming in without having to spend any to get it started.

pbreit3• 12 years ago

If you want to pay yourselves even $50k/year you're going to need a few hundred grand. You could start with friends and family. But it does sound like some sort of accelerator might be a decent idea. Are there any in your vicinity (or in vicinities you would consider moving)? The accelerator would ideally help you with funding and pretty much every question you're asking.

If you do go the outside investor route, be careful with your pitch. Most startup investors are wary of near term cash flow & profits. That indicates a small return for them.

josephjrobison• 12 years ago

What school do you guys go to? I went to USD, and was surprised to see it listed as one of the 3 schools. Definitely think this is a great alternative to Craigslist, and the fact that the properties are pre-selected to accept college students saves a ton of time. And it's beautiful - good work. I don't have much advice on the raising money side, but as a user I love it.

sthielen14• 12 years ago

Glad you like the site! We are all Chapman students. The whole reason we started the site was actually because we all had horrible experiences renting properties when we transferred here last fall, and found out there weren't really any resources to help college students.

meerita• 12 years ago

I would recommend hire someone with economics sale perspective while you focus on getting the product better.

zefi• 12 years ago

Submit a late application to YC? I'm an Alum and would be happy to chat more. My email is in my hn profile.

tejasm• 12 years ago

This actually sounds like a good idea!

mmaunder• 12 years ago

First ask yourself if you really are making money. Does the amount of money you will bring in equate to market rate salaries for you and your co-founders 12 months from now? With some money left over for growth?

If the answer is yes then it sounds like you have a business on your hands. Create a cash flow plan. It should show how much you'll be bringing in and how much you'll be spending on a month by month basis. Do it 18 months out. Make it as close to reality as possible.

Then try really really hard to make it work without raising money. If that means you grow a little slower, that's OK. If it means you have to be a bit more frugal, that's OK because that's the cost of your own company's stock. (The alternative being, you sell that stock and get money to grow the business, so you lose that chunk of ownership).

Assign someone as your CFO. They're the cash-flow tzar. Anytime someone wants to spend, they have to go through that guy. The tzar should also have a talent of finding new pockets of money even when it seems that you're about to run out.

Just because you're going to get a TON of offers from investors doesn't mean you should raise money. I'm sure you get a lot of offers from credit card companies too.

Once you raise, your definition of success is no longer 1 million bucks a year in revenue and $300,000 a year salaries for you and your two buddies (which would be awesome right????!). Instead you're going to have limits on how much you can pay yourself, who gets to be boss and how much of a boss you get to be, and your definition of success becomes $10 million a year in revenue instead or you raise again and again and then you have to IPO.

danesparza2• 12 years ago

OP also posted "as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away."

It sounds like they have revenue, but they do not have profit.

ar7hur• 12 years ago

(~40% w/w growth, 100%+ m/m growth)

You should fix this enormous mathematical inconsistency, or everything else you claim is suspicious.

sharemywin2• 12 years ago

I'm not sure your upside is very big. you might what to think about where you go from there. 150 universities. real busy once a year when everyone is looking for housing but not much most of the year. how big were you advertising deals? have you had anyone re order adverting? Any business owner is willing to give a couple kids just to starting out $200. Most investor would want this to be at least $10M business. 60k per year per university. 5k mo per univeristy. Not trying to be negative but, I would hate for you to chase a bad path when you can focus on what could work. if someone has better incite let me know? Also, maybe you want to talk to the group doing rent a sales force. saw it a couple of days ago on here.

dsugarman• 12 years ago

1.41.41.4*1.4 != 2

not really close and super suspicious. know if you actually need to raise money and why and if you do, know your numbers. also don't just look to raise money and hire whoever you can get your hands on to 'manage a business' know who you need and why, plan a top line growth strategy, and a more humble strategy with less capital

pbhjpbhj• 12 years ago

This was actually the thing that leapt out at me - I don't really have experience of investors except watching Dragon's Den(!) but they've always been super-harsh on those that misrepresent their figures [or at least are caught doing it].

1.4^5 ~= 5.4

Make sure you're being truthful about your figures with yourself - like don't assume you're making a profit just because you're taking revenue, especially not if you're not paying wages yet.

webmaven4• 12 years ago

I assumed that the latest w/w is 1.4, whereas the m/m includes earlier weeks that aren't as good, eg. 1.1 x 1.1 x 1.2 x 1.4 ~= 2.03

sthielen14• 12 years ago

I'm going to be honest and admit that I'm still not entirely comfortable with calculating this metric. I've just been going into Google Analytics and dividing our weekly "Users" graph by the previous week, and then averaging all those percentages together. Same for monthly growth. I'm assuming, from people pointing out errors, that this is not the correct way of calculating growth?

Regardless, we've seen significant and consistent increases in traffic, but I'd definitely like to not sound like an idiot (or worse, have my errors be decried as misrepresentation), in the future.

codingdave• 12 years ago

Take small, manageable steps, and do not be in too much of a hurry. Startups don't have to have explosive, expensive growth... that may be the path that makes news and excites people, but most small companies grow slowly.

If you have revenue, then your next step should be to decide what can be done within the limits of that revenue. Nothing you described sounds like you need any capital investment. Funding is a shortcut, not a requirement.

patio11• 12 years ago

Choose your own adventure:

1) You currently have approximately $500 to $2k in revenue. That's great, because it is $500 to $2k in revenue more than the vast majority of people will ever achieve. You need to work the numbers on whether the founding team can solo-close $100k in revenue in the next twelve months.

If that appears achievable, you tighten your belts, perhaps run up larger balances on your credit cards than usual, and start solo-closing every business you can find locally. You'll spend approximately 95% of your effort in the short term on ad sales and 5% on everything else. After you can consistently keep the lights on, you're going to hire a bunch of folks who will do that job to your script on the telephone all day, every day. They will be the heart of your business. They will always be the heart of your business, for values of "always" which map to "as long as you primarily keep the lights on by convincing local businesses to buy advertising."

There is a reasonably achievable path to you having a business here which closely resembles a well-run local newspaper (except you'll potentially have nationwide reach): millions of revenue, ~20% margins, etc. Much like local newspapers, it may be a not-quite-straightforward proposition to confidently say "The people who pay us get great value for their advertising spend."

If your team cannot reasonably solo-close $100k in revenue by repeating your current model, which I allocate a very non-trivial percentage of the probability space to, you do not actually have a revenue model yet. I'd have a hard look at my bank account and say "Can we figure out a revenue model before I get thrown out of my apartment for non-payment of rent?" If not, you may consider winding down the business. There is no shame in this and, while you may think your current level of success is a once-in-a-lifetime opportunity, if you hypothetically believe that I would take the other side of that bet.

2) You have a very compelling pitch for getting into YC, 500 Startups, or another incubator. You have actually shipped a software product. You won't believe me when I tell you, but many, many people who you might think are better fits for incubators cannot actually ship a software product. You have also successfully demonstrated hustle, by being able to walk into a furniture store and ask them for money, which is something which is lamentably rare among people who are capable of actually shipping software products. The combination of shipping and hustle is pretty much exactly what incubators look for.

This is a straightforward pathway into Door #3, in case executing on Door #3 doesn't sound straightforward to you.

3) You have all the elements necessary for raising a small seed round. You make an AngelList profile and curate it diligently. You approach a few investors privately, show them your stats and paint a rosy picture of the future ("We've potentially got Groupon's growth trajectory ahead of us! [+]"), and secure, say, three to four commitments of $25k each. You start to trend on AngelList and fill out the rest of the round, probably for $250 to $500k. (I'm unaware of what the Going Rate is for valuations at the moment -- probably mid single digit millions but ask someone who does this professionally to fill you in there.) You bump yourself up to greater-than-subsistence salaries, hire three or four people who are young and hungry, and aim to sustain those growth rates for the next 8 to 12 months. If you do, you will sail easily to Series A, on your way to creating an rather large business which may or may not resemble the one you are presently running. If you don't, your company implodes.

[+] "Patrick, is that a good thing?" None of the seed stage investors in Groupon are cursing their name right now. To put it mildly.

larrys2• 12 years ago

"you're going to hire a bunch of folks who will do that job to your script on the telephone all day, every day"

Cracking this particular market without a super motivated and nicely paid phone force is really difficult. SMB are hard to get on the phone and to pitch. Over the long term of course. Anything short term is possible. I've been in this market and even purchased a company that did this where the previous owner moved out of town [1] and specifically said "you can't do this type of selling remote you have to be physically in their face".

Others have done this of course but iirc they tended to be well funded and able to lose a ton of money gaining sales. (Groupon).

[1] My point being he wouldn't have sold the company if it could be operated remote and that had in fact been tried by previous owners. (This was advertising to reiterate in a printed publication).

pbreit3• 12 years ago

I would think 1 student-employee per school could do it. You're only going to get 20-100 advertisers per school.

sthielen14• 12 years ago

Hi Patrick,

Thanks for the advice! I'm an avid reader of your blog, so it's cool to get feedback from someone I admire in this industry.

A lot of the comments here are bringing up the question of if and _why_ we need to raise funding, which has been something we've asked ourselves (and are asking ourselves even more in light of these comments). Essentially it's a combination of necessity and validation. We're college students ourselves and we realized early on that the only way we're going to be able to make this business successful is if we treat it as a full-time job and throw everything we have at it. We all quit our actual jobs because the website needed the focus, and that isn't a sustainable path for much longer, even if we do have a couple thousand dollars revenue in the business bank account. However, I definitely have to disagree with you that this should lead us to consider closing up shop, just because we personally don't have enough funds to continue running this out of pocket until it can run itself doesn't mean the business doesn't have potential and should be abandoned.

Choosing Door #1 while continuing to knock on Door #3 has always pretty much been the plan, we just don't know where to find the investors for Door #3 and that was what led me to posting here. I didn't really expect it to get so much attention, haha.

And a lot of people are critiquing our business plan/strategies--which I am grateful for and do actually appreciate--but I didn't really intend for this to be an elaboration of our business and I didn't really write my OP in order to explain how everything works and what all our financials/projections are, rather I wanted advice about moving forward from here. Yes we can keep doing the same thing we're doing and slowly build (and that's what we're going to be doing), but we don't think it's unreasonable, as a tech startup, to be seeking some sort of funding in order to grow faster and more efficiently.

We're actually using some of the money we've made to hire someone to come over to our house for 15 hours a week and sit on Skype and find/maintain the property listings in our database, as that's the most menial and time-consuming bottleneck we've identified. That way we can continue to focus on product dev and sales instead of having to devote a good chunk of every day to making sure the website is up to date. This should free up enough time for the three of us to take on another school, and just keep doing what we're doing.

Thanks again for the advice!

Sean

swalkergibson5• 12 years ago

And a lot of people are critiquing our business plan/strategies--which I am grateful for and do actually appreciate--but I didn't really intend for this to be an elaboration of our business and I didn't really write my OP in order to explain how everything works and what all our financials/projections are, rather I wanted advice about moving forward from here.

In order to properly provide advice about the next steps, this context is necessary. If it is costing you $10,000/month to pull in $500/month revenue, then you must begin to consider its viability in its present form and come up with a different revenue model before you go from broke college students to indebted college students.

It sounds like you have already made up your minds about the way you want to go. I would recommend really reading all of the commentary here, because these are all questions that anybody with any money is going to ask, so you should have good answers.

Firegarden• 12 years ago

If you guys are actually paying to learn from a college that is the first thing to change. A business owner used to say to me "Kid you have to take the bull by the horns" and I never really got that until later in life. It's true man. I a self taught programmer and I had the option of going to school or working at a start up. Aside from the personal pleasure of school - it just fucks you up. For real. 1)Quit wasting your time in college. 2) Quit waiting for somebody to walk up to you and write you a check and say I believe in you - it's an illusionary permission slip. 3) Work on this more.

Think about it - whats the worst that can happen you have to go back to school? You can't get a job? Bullshit this is your resume and your education - trust yourself and go for it.

whence• 12 years ago

perhaps run up larger balances on your credit cards than usual

Strongly, strongly, strongly disagree with this. The only balance you should ever run on your credit card is $0. Treat it as cash.

ghiculescu3• 12 years ago

Why on earth would you say that? They're just about the cheapest form of loan you can get, and are perfect for OP's needs.

mbesto• 12 years ago

Debt is an instrument. Instruments can hurt or help. Instruments utility is based solely on how you personally utilize them. So, the answer, as always is, "it depends".

slapresta• 12 years ago

Sadly I have nothing to contribute on raising money, but I just want to say that the idea is amazingly well thought. It's uncommon to see a platform in which ads are unintrusive and helpful. Well done.

larrys2• 12 years ago

Used to own a business that sold advertising in the same college market.

Be very careful when extending credit to advertisers. The sale is only one part. The other part is collecting the money. Would suggest you try and not extend credit and get paid if at all possible by credit card. The back office and aggravation can be quite aggravating. People will take advantage of you. They will tell you to show up to get a check (after you pester them) and then they won't have the check and tell you to return.

Edit: I made this comment because the op had mentioned closing sales in person (or perhaps over the phone). This is not the same as a website with a "pay here" link. When you close in person there will always be customers who attempt to get credit terms. Think in particular what a chain restaurant would do or a company where the management is located elsewhere. They will say "send us a bill and yeah sure we will pay" or "can I give you a PO". So the question is how lucky do you feel. Of course if the COGS is very low it pays to take a risk. But just get ready to have to follow up multiple times over many months to collect that money. And don't act like it's in the bank because it's not in the bank.

smoyer• 12 years ago

I'm probably going to be a minority voice here but I think there are a couple opportunities/risks ... since you're curating properties around each campus AND selling ads to local businesses, I think there's a pretty good opportunity to franchise the "feet-on-the-ground". You might be able to charge for the franchises, but even if you can't, you can still pay straight commissions as a percentage of the income from each campus area. If the franchisee gets 50% of the ad revenue and is in charge of driving traffic to your site, the 50% you keep would need to cover your server costs and the founders living expenses.

As an aside, I'm near Penn State and I'm not sure whether this would work here. Most of the properties that will rent to students at all are managed by property management companies and the students tend to find those companies first (there's a lot of local advertising). First year students are required to live on campus, but they tend to start visiting the "apartment stores" during their second semester. Do the three campuses you're currently servicing operate in a similar way? Maybe the current crop of tech-savvy students look to the Internet first since they've had it from birth?

In any case, great to hear you're making money and good luck!

Paul_Dessert• 12 years ago

At first, I thought, "Oh good, another classified site" but then I looked at your site. Loved the UX. Nice work. One thing that seemed a bit "meh" was the name.

Good luck!

mikeho1999• 12 years ago

First of all.. congrats! It's always exciting to see something you've created grow and start to gain traction.

Second of all, please take all of the advice that you see here with a grain of salt. I think most of the ideas that people have shared are really good things to keep in mind for consumer-oriented SaaS platforms in general, however, IMHO the university / college student listings market is a completely different beast.

Speaking as someone who co-founded the largest student classifieds system (at our peak 4-5 years ago we had over a million students using our system at over 400 universities nationwide), I can tell you that a lot of the business modeling that people do for consumer software service businesses are not necessarily compatible with the market that you are in.

I couldn't help but notice from your site that you're in San Diego -- I'm actually in SD as well, and if you're up to chatting more, I'd be more than happy to meet up. From my HN profile you can link to my website -- the very bottom of the "With Whom" section talks about the startup I helped to co-found, and the "Where" section provides contact information if you want to get in touch with me further.

Best of luck!

southflorida• 12 years ago

You could put your idea on kickstarter. It may help you bridge the gap until you can hire more help with your own resources. Or hire virtually to make sales in each of the target states and pay on a commission base for closed deals.

Killswitch• 12 years ago

I have no real advice here, I just have to say your site is beautiful and well done. Congrats.

leonhuu007• 12 years ago

I believe you should concern on the quality of the business first before you raise any capital. $695-$1200 can be alot of money for some local businesses since landlords are killing them with high rent. The key here is to train your sales team to show your potential advertisers the Math. Compile data and show them if they spend $695 they can get 3-6x that in return otherwise chances they will call you can cancel 6 months later. Numbers never lie so try to focus on tracking how many students click or view a particular ad and maybe come up with a conversion funnel analytic data for the local business owners. This can be a powerful selling tool.

If you can bootstrap it with profits then stick to it. Growing something too fast can lose the quality of the product. Once you have happy paying customers, growing it exponentially won't be so hard.

I love your idea, love your design, keep it up.

clark-kent• 12 years ago

Find a successful entrepreneur who has gone through the process, get them interested in your business and go from there. Take them in as an adviser for your business. This will save a lot of headache and pain.

alasdair_• 12 years ago

I have a very similar problem. We have built a system for building niche websites for collectibles and plan on scaling horizontally - adding new collectibles in a similar way to the way you add universities and re-using the same code to power each niche.

We're making some money on the trial niche ($5000/ MRR and growing) and have our first 100K monthly users close to product/market fit (78% would be "very unhappy" to lose us).

Just like you guys, we don't really know where to go next. Right now, we plan on bootstrapping (we both work full time for well-known firms so all the revenue goes to contractors) but raising a "real" seed round could change everything.

Just like you, we have no idea if we should raise a seed, crowdfund (people LOVE their collections and we made 10K in 3 days in a small crowdfund) or continue to bootstrap.

Not sure it matters, but coming from someone in a very similar place - we are rooting for you!

ericwu01• 12 years ago

Happy to chat as well. I know this space well. Would chat with a few seed funds to gauge interest - Resolute is a good place to start.

mhirshland• 12 years ago

Mike from Resolute here. We'd be happy to chat and see if we can be helpful. Mike@resolute.vc.

wiseleo• 12 years ago

Nice site.

You are creating something similar to the change of address packet and welcome kit by the USPS. When you move to a new area, you get an envelope with a ton of local offers for new movers.

This is what I am talking about: http://imagitas.com/mover-advertising-solution/welcome-kit.h...

You will find its companion Mover's Guide at your local post office. Simply ask for it from any USPS clerk. Studying it may prove to be very interesting as it will help you identify which companies already advertise to movers.

I like that you offer to connect prospects with landlords by prompting the site user for her phone number. Someone needs to figure out how to get them to pay you. You may want to offer landlords pre-filled rental applications instead of just phone calls.

"Apply Online" becomes a premium feature for which some landlords may be willing to pay (this needs to be tested).

We should talk as I may have a way for you to make more money involving my product. I also have contact information for every moving company. I am wiseleo on skype, gtalk, gmail.

endeavor• 12 years ago

Well done! The site looks great. I've actually been thinking about a similar product in a totally different space. If you could spare a couple minutes to answer, I have a couple questions that are probably really basic but I've been struggling with:

1. I see that you have a "LIST YOUR PROPERTY" feature, but how did you seed your DB? Just search CL, call the owner and ask if they're open to renting to college students?

2. How did you settle on making your own advertising platform your main revenue stream? When you have a niche market like this, is Adwords (or similar) not a viable alternative? Have you thought about charging the listing agent directly?

shyn3• 12 years ago

Curious if you thought about franchising your site. It might work in terms of cost because you would only have to profit from your first location and keep growing it.

i.e. Offer an instance of universityniche.com but purchase a domain, host the site, setup the login and credentials, configure, maintain, and support the site. Control all the features. Let the person decide what domain they want.

In my instance you could offer torontouniversityhousing.com and I would only have to manage the sales/listings. Charge say 80% of profit or fee based or something a lawyer/accountant recommend.

swalkergibson5• 12 years ago

You have an absolutely gorgeous product. I say that as someone who contributed on a contract basis to a similar system for a couple of guys in Arizona trying to do the same thing. I think that your local advertising model is going to be extremely difficult to execute and is going to scale poorly, so I would recommend moving that to a secondary revenue model. There are lots of ways to make money in this market that does not involve inefficiently calling up shops and asking them to part with advertising dollars. My feeling is that you are technically savvy enough to create a more complete property management solution that landlords would pay for. One other revenue stream that I thought was interesting for the guys I worked with was pre-approving tenants with a background check, credit report, etc. That way, the tenant would pay an application fee once to you, and then that application could be used at different properties during the tenant's search process (think of it as The Common Application for housing).

Additionally, your advertising prices are obscenely low. Your largest package tips the scales at $1,200/year. To be perfectly honest, selling five of those packages is not especially impressive. Assuming that you sell your largest package to every advertiser, you will need 83 advertisers to clear $100k revenue, assuming no turnover and nobody ever calls you to complain or whatever (and believe me, they will). Furthermore, your UI can probably only support fifteen or so advertisements per university without becoming utterly saturated, so you are constrained there as well.

Suppose that you sold fifteen placements per college and had no turnover, your max revenue is $2,700,000 and now you have 2,250 advertising customers to coddle and keep happy. Granted, that is a huge pile of money and anyone would be absolutely thrilled to make it, but now you have to back out your expenses.

Assume that each of the three of you are going to draw $100k salary, now you are talking $2.4M, and now you need to pay account managers, sales people, customer representatives, not to mention all of your technical staff and infrastructure.

You have a phenomenal product, but find out how to sell it for money to people that use it instead of advertisers. Advertisers should be the gravy!

Feel free to email me if you want to discuss further. Email is my username [at] the gmail.

InclinedPlane• 12 years ago

Just keep doing the same thing until everyone working on the business is earning a decent, regular paycheck and the business has built up several months worth of operating expenses in savings. Then you can start to thinking about investing in expanding elsewhere. Start by streamlining your processes and keeping your expenses down.

peterlada• 12 years ago

Incubators are a good idea at this stage. They will groom you, get your ownership in order, teach you not to say stupid stuff and curate the VC space for you. You will raise if growth keeps up. YC, 500, TS on west coast or TC, DreamIt, ERA on the east. Go for it.

randomthoughts• 12 years ago

I really like the interface. I think if you have enough properties listed you can't fail. If it was me doing this the next step would be employing local people responsible for taking care of schools in their region. The only expense here could be legal fees for drafting a contract template making sure those people are self employed "suppliers" paid a percentage of profit their activity generates. This way you wouldn't need to worry about all other costs associated with employing people.

Also, why not talk to few large property listing websites like (UK examples)rightmove.co.uk or zoopla.co.uk to partner with them? Those guys get fees when properties they list are filled. It is in their interest for them to be advertised as widely as possible.

Or alternatively create another type of a user. An estate agency. You could have hundreds of estate agents sign up and list properties on your website paying extra to make them come up first etc.

allochthon• 12 years ago

I've worked at a startup that got a large infusion of capital. I hope never to work at such a place again. I would aim for organic growth over VC and plans that aim for high-octane supercharged expansion any day. I would bootstrap if necessary.

Im_Talking2• 12 years ago

Jeez, everyone is talking incubators, YC, angels, etc. People don't realise that this type of money is the most expensive you will EVER get. And trying to get this funding will consume your business for the better part of a year, at least, with everything else on-hold to the point where you have neglected the actual business long enough that you will need the funding, and die without it.

Bootstrap for as long as you can. Be smart. Be imaginative. Seek out partnerships with customers as they can be a great source of money/advise/contacts if they feel it can benefit them. Sounds like customers love the concept, so get them to pony-up some money or contacts. Then, the cheapest money is the money you don't need.

Equity should be treated as gold. And a lot of founders who create successful businesses kick themselves for the mindless throwing-around of equity in the early stages.

I would suggest setting-up an advisory board. I'm sure you and your co-founders will know several smart people, or ask customers who they recommend.

Tell HN: My startup is making money and I don't know what to do

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