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| | The Let's Form a Startup! Network is not currently active and cannot accept new posts | | Which Bootstrapping method makes the most sense? | Views: 802 | | Mar 01, 2006 1:59 am | | Which Bootstrapping method makes the most sense? | # |
Travis Hughes Interactive | | After many, many months of hard effort and false starts, my advergaming product is finally
moving ahead, line by line of code.
However, at the rate it is moving it is still 6 months away until I'll even have an
alpha version and perhaps 12 months total until it is stable enough and complete enough to sell.
But I don't want to lose any more time on this as it's being developed.
To capture this time 'under the curve' I have two options:
1) Spend more money to get it built faster (that is, hire some additional engineers).
But the catch is I don't have the money to do so, which is why development is stretched
out over these months.
OR
2) Let it product development continue at the same rate but spend my time building a stable of
customer accounts/my rolodex and getting revenue by selling a similar substitute product
into the marketplace. In this case, I would partner with another foreign company (European)
and I would own the customer relationship and ideally later replace their product with my own
as I would own the customer relationship and I would be the single point of contact for these
customers. But there are risks to it.
Options To Consider:
===================================
1) Approach a particular European company that has core technology, sell for them/represent
them in US and get them to make a few 'tweaks' to the product to make it salable into the marketplace.
Benefits:
- Early user feedback, ability to sell into accounts I need for my product when it's done.
- Own the customer relationship
- Make money to fund my company and build it faster
Caveats/Dangers:
- I may create a new competitor who was unaware of the use of their technology in this market
- Customers may not want to switch to mine may ask the European company to 'tweak' core technology for their use.
2) Find a couple other engineers willing to work for equity.
Benefits:
- Can get work done much faster, cash expenditures stay almost same (save for variable expenses).
Caveats/Dangers:
- Took me 6 months to just find the first engineer!
3) Raise either angel or VC money to fund my plan.
Benefits:
- Can speed this up dramatically.
Caveats/Dangers:
- Give up lots of equity
- May never get the funding so wasting lots and lots of time, energy and focus PLUS your plan
is then, "out in the wild" and the VCs may give it to a friend who copies it or somehow else
I get screwed.
4) Get Full time job (and stop the consulting)All,
Benefits:
- No need to give up more equity. Earning lots of cash to pay programmers and can hire a couple more.
caveats/Dangers:
- Very stressful
- Becoming unfocused/scattered from full time job and startup
Comments, ideas on this?
Thanks.
TravisPrivate Reply to Travis Hughes Interactive | | Mar 01, 2006 2:16 am | | re: Which Bootstrapping method makes the most sense? | # | 
>> Barry Caplan - Start Your Future Today | | Or you could just open source the code, and accelerate development that way....OK, not so simple in process, but if your business might support a model of revenue that doesn't require a proprietary code base, that could work well to accelerate development.
Best,
Barry
- Product Marketing for Digital Entertainment and High Tech Startups
- Are you Investing? Ask about our Investor-side Services!
http://www.ProductManagementDepartment.com : Start Your Future Today!Private Reply to >> Barry Caplan - Start Your Future Today | | Mar 01, 2006 4:54 am | | re: re: Which Bootstrapping method makes the most sense? | # |
Travis Hughes Interactive | | >Or you could just open source the code, and accelerate >development that way....OK, not so simple in process, but >if your business might support a model of revenue that >doesn't require a proprietary code base, that could work >well to accelerate development.
>
Thanks Barry. We've looked into that earlier but for the part we are working (which is the key part) this isn't possible.
For other parts of the program we may be able to do that but those aren't as critical and are further out on the roadmap. We also searched high and low for open source that we could find in this regard but it wasn't really usable (although we did find a few attempts at this).
TravisPrivate Reply to Travis Hughes Interactive | | Mar 01, 2006 6:14 pm | | re: Which Bootstrapping method makes the most sense? | # |
James Griffin Media | | Okay, as I've gone through some similar obstacles with a previous startup, seen my friends experience similar things with their startups and I'm now experiencing similar issues again, please let me share some very 'tough love' with you.
The issue boils down to this -- Keep things simple and do whatever you can control and effect today. Forget about 'investors', 'VC's' and all these big deals or dreams. A complete waste of time in my opinion.
*** See Below For My Detailed Analysis ***
>Options To Consider:
>===================================
>1) Approach a particular European company that has core
>2) Find a couple other engineers willing to work for >equity.
Summary answer: NO WAY!
This could work, but, as you say you risk making a big competitor! That alone would scare me. Why risk it? Why tip them off?
Secondly, you first have to get the company to sign on, agree to join with you, work out the deal, etc. -- months of effort, scattered attention and wasted time.
And for what? To maybe make some little money or get in front of customers for future sales?
Forget it! The ROI on that deal and downsides say 'two thumbs down!'
If you want to do that, go sell your plan to prospective clients and try to get them to prepay, invest, buy your service, etc. and fund it that way
Or get a full time job and invest money from that. I'm serious and more about this later.
>2) Find another engineer
>
Summary answer: NO WAY!
This could work but it also is very 'iffy'. You may be wasting your valuable time, energy and money here.
Instead, focus either on getting paying customers or working full time/consulting for others to generate hard cash to buy what you need and spend more time working with your current engineer.
>3) Raise either angel or VC money to fund my plan.
>
Summary answer: NO WAY!
Forget this -- it's a waste of time. I'm sure you have a great plan and idea but why invest your valuable time in something over which you have no control? Forget it!
You are better than that. Endless dog 'n pony shows,
listening to babbling VCs blather on all so you can wait 4 to 8 months at best to get some money if you even get it at all!? Also, remember you will get the money so late, it won't even help much -- instead focus on organic revenue, customer pre-pays, development, etc.
At some point, yes, you may get funding, need it or be ready, but don't waste time now.
Now, there is always the chance you will get funded. If you want to try that, here's what you do. Create a two page executive summary. That's it.
And contact or send it to some VCs/angels. If they want to discuss, great, then make a 5 page power point slideshow. If not, you didn't waste any time.
I have a friend working on a product similar to my concept in the dating space who has spent almost $10,000 on his plan in hard case and wasted time. He has not met with one VC yet.
The dirty secret of the VC is this -- if they don't like your exec summary, it doesn't matter how great you are or how great opportunity is, etc. You are out.
On the other hand, if you have a great exec summary, you can get in and then each step of the way, create the rest.
If they really like you, they will work with you and say, 'hey we like you exec summary let's meet'. And then you bring a small powerpoint and meet. And create each piece before the meeting. That way you hedge your time.
The downside is it's still a waste of time meeting with these guys,etc, etc. and you risk them stealing your idea or giving it to their friends, associates, etc.
>4) Get Full time job (and stop the consulting),
>
Summary answer: YES!
You are in complete control here. You are the investor in your own company. It's hard, it's tough but each day every effort you make, every dollar you invest moves the company forward!
Okay and now I add this option:
(5): Find a customer now and try to prepay/pre-sell your services.
Why not do this? See if you can pitch customers to buy now! And if you do this with getting full time job/concentrating on it, you are set and you can fund it that way.
And buy the way, it sounds like you've already written the product spec, marketing plan, biz plan, etc. If so, you have all you need. Just work with your engineer and earn money from a job to plow back into your company and when you feel you have extra time pick up the phone and meet with prospects and try to sell them.
These are just my thoughts. I hope you find them helpful.
---- JamesPrivate Reply to James Griffin Media | | Mar 01, 2006 6:46 pm | | re: Which Bootstrapping method makes the most sense? | # | 
Robert Johnson | | Travis:
It is very difficult to create a company with virtually zero capital or cash flow. Most talented professionals (including those who write code for a living) are in business (or working for someone full time) and expect/ need to get paid for their services.
As to your 4 options:
1. In addition to creating another possible competitior, you may place yourself in a delicate position regarding "intellectual property" including customer lists, customer requirements and other things.
2. AS you said , finding engineers who will work for equity takes a lot of time. It can be very expensive and generally creates a very different relationship between you. (ie they are more partner than employee or contractor!
3. You've already expressed your opinion and feelings about "giving up" equity.
4. So therefore - if you want to move forward faster and can make more in a job than consulting - then this is the road I would suggest. It can be stressful - but will it be more so than where you're at today?
All the best,
Robert JohnsonPrivate Reply to Robert Johnson | | Mar 01, 2006 9:25 pm | | re: re: Which Bootstrapping method makes the most sense? | # |
James Griffin Media | | >Travis:
>
>
>As to your 4 options:
>
>1. In addition to creating another possible competitior,
>you may place yourself in a delicate position
>regarding "intellectual property" including customer
>lists, customer requirements and other things.
>
This is a great point. And if you are legally safe, it doesn't matter. If the other company feels wronged or is a shark they can sue you and you'll pay thousands to defend yourself. Not a good thing.
>2. AS you said , finding engineers who will work for >equity takes a lot of time. It can be very expensive and >generally creates a very different relationship between >you. (ie they are more partner than employee or >contractor!
I have experience in this and I'm just structuring a new deal now for my dating software. You have to have the right people and not only have good contracts and be on the level but make sure everyone is abiding not only to the letter of the contract but the unwritten spirit.
If you can do it great, but it's very hard work and not a given.
>3. You've already expressed your opinion and feelings
>about "giving up" equity.
>
I don't get his position here, because if he does #2, he gives up equity too. So why is it worse to give equity to a VC but not an engineer? If he could get cash for equity from the investor than use the case to purchase engineering services -- that's much easier.
>4. So therefore - if you want to move forward faster and >can make more in a job than consulting - then this is the >road I would suggest. It can be stressful - but will it >be more so than where you're at today?
I concur with this. I still think he should throw out some biz plans to investors and see if there are any nibbles or bites.
JamesPrivate Reply to James Griffin Media | | Mar 01, 2006 9:53 pm | | re: re: re: Which Bootstrapping method makes the most sense? | # |
>> Barry Caplan - Start Your Future Today | | > > >3. You've already expressed your opinion and feelings
> >about "giving up" equity.
>
> I don't get his position here, because if he does #2, he gives up equity too. So why is it worse to give equity to a VC but not an engineer? If he could get cash for equity from the investor than use the case to purchase engineering services -- that's much easier.
-------------
Dunno. Maybe because of personal bias, or because of different vesting rates and rules? One ultimtely would be able to cash out before others in the case of IPO, maybe he doesn't want that to happen?
Best,
Barry
- Product Marketing for Digital Entertainment and High Tech Startups
- Are you Investing? Ask about our Investor-side Services!
http://www.ProductManagementDepartment.com : Start Your Future Today!Private Reply to >> Barry Caplan - Start Your Future Today | | Mar 01, 2006 10:14 pm | | re: Which Bootstrapping method makes the most sense? | # |
Robert Johnson | | James states: " I concur with this. I still think he should throw out some biz plans to investors and see if there are any nibbles or bites."
It's been my experience that "throwing out some business plans" isn't the road to success.
One can always try it - but I think it leads to the frustration about investors expressed by several postings on this group.
If one is seeking capital - I think there are other approaches tht have a higher probability of success.
Robert Johnson
Private Reply to Robert Johnson | | Mar 02, 2006 12:00 am | | re: re: Which Bootstrapping method makes the most sense? | # |
James Griffin Media | | Hi Robert,
I didn't mean to suggest that the 'shotgun' approach was the best one but that in Travis's case he could just give that a go and see if it yielded anything.
In my experience, that founding route takes a lot of work, preparation and tenacity. And having a great plan isn't a guarantee to get funded.
If you just go in with a good exec. summary you'll either make the cut or not. If you make the cut just keeping working for each new step. But if you spend months and months a plan and thousands of dollars I think money and time could spent on higher yield activities.
I know many entrepreneurs view VC money as validation of their business or ideas.
In fact many entrepreneurs also view media attention or publicity as validation of their ideas or business. But the Segway is a perfect example of VC funding and publicity really meaning nothing to your financial
success.
Actually, I've got a small plan (3 pages), I'm polishing and tuning and then I'm just throwing it over the wall to a couple VC and angels I know. But that's it.
JamesPrivate Reply to James Griffin Media | | Mar 02, 2006 12:23 am | | re: Which Bootstrapping method makes the most sense? | # |
Robert Johnson | | James:
I agree that spending time and money to polish a business plan isn't necessarily the best use of resources. However, as a plan developer, I find that the executive summary is best done after the plan and so I've seen many "summaries" that don't have the depth behind them.
While I don't suggest an expensive plan, I do believe the process of careful consideration and writing down the results should be done before approaching investors.
Robert Johnson Private Reply to Robert Johnson | | Mar 02, 2006 11:21 pm | | re: re: Which Bootstrapping method makes the most sense? | # |
Travis Hughes Interactive | | >1. In addition to creating another possible competitior, >you may place yourself in a delicate position >regarding "intellectual property" including customer >lists, customer requirements and other things.
>
Thank you. Yes, my attorney raised this same issue. It just seems like a can of worms to be avoided.
TravisPrivate Reply to Travis Hughes Interactive | | Mar 02, 2006 11:25 pm | | re: re: Which Bootstrapping method makes the most sense? | # |
Travis Hughes Interactive | | >I agree that spending time and money to polish a business >plan isn't necessarily the best use of resources. >However, as a plan developer, I find that the executive >summary is best done after the plan and so I've seen >many "summaries" that don't have the depth behind them.
>
>While I don't suggest an expensive plan, I do believe the >process of careful consideration and writing down the >results should be done before approaching investors.
That's right. It's hard to create an executive summary if you don't have something to summarize first!
So it's not like you can just make a one page summary without a plan to summarize, well I guess you could if you just pulled figures out of thin air and used assumptions put didn't do the backup work.
Just throwing a plan to the VCs or scattering like a shotgun would seem to be a very low probability of success act - some may even call it desperate! :)
TravisPrivate Reply to Travis Hughes Interactive | | |
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