Ask HN: Where do I go from here?

9 points by davidfm 12 years ago | 26 comments

Over the past 7 years I've been building a SAAS. It's good. I have 20 customers all from referral. They think it's good. It has the potential to be huge. Currently, it earns me a low income - bootstrapping it's development.

I'd like to raise VC to grow it. But the last time I did that, it swallowed a year and brought down a 25-man company. I tried hiring a developer but didn't have the cashflow to cover the time recruiting, finding offices and managing. I've tried raising cash from friends / family / clients. That might happen yet, but it's an incredibly slow and time-consuming process.

Can HN help suggest the best route forward?

brudgers 12 years ago |

So here's the question: would you bring in a 50-50 partner (both of you on a vesting schedule) in order to scale and not merely grow? That is, would you give someone half the company to triple customers in a year...or something like that?

The last seven years is sunk cost and the only effect it can have on the future of the company besides providing a knowledge base is psychological drag. And bringing in a partner with large equity is exactly what taking VC is anyway..except that VC will make decisions based upon distribution of risk while a 5050 partner will have a similar concentration of risk to yours.

Overcoming the sunk cost mindset is tough. Just giving someone half a company you spent seven years building sounds crazy. But the seven years you spent getting to this point are irrelevant to VC decision-making. All that matters is going forward. Any different orientation on your part creates an impedence of expectations.

Good luck.

davidfm 12 years ago | |

Thanks for that. Interesting. Would I give up 50%? Yes - for the right return. I know I can do much, much better than triple customers if I can leave the technical debt to someone trustworthy. I accept that the last seven years is sunk cost. But I have seven years of amazing customer relations - a network that will flourish into $$$ when I have the opportunity to scale. I also have a product. Maybe not the perfectly polished product that developers better than me can make it, but <bias>It's Already Good</bias> and it will only get better. At this stage, giving (say) 50% to a VC and using that to buy staff (and ideally get accelerated growth via the VC's network) or giving that percentage to a partner who will concentrate to the same degree doesn't phase me. In my mind, they are each 50% of different values. The VC's investment immediately values the business greater than it currently is. The right partner does the same. I'm open to both routes. My problem is getting from here to either of those positions without killing the business whilst focussing on it.

Edit: just looked at your blog - my system mails checks and takes just a little of that back every month :-)

brudgers 12 years ago | | |

I used triple just because it's a low but obvious payoff for 50% equity.

The immediate problem is not lack of money but lack of staff. Taking VC means turning up the heat on the lack of staff problem, and more money does not identify the right technical candidate, and in my mind at least, you really need a technical candidate who is partner grade and partner committed. Someone without the commitment can leave behind perfectly good code in an environment where those who remain were not close enough to its creation to quickly make sound modifications...imagining what a person without technical chops can leave behind in the code base is left as an exercise for the reader.

[Glad you enjoyed the blog.]

vasudevan 12 years ago |

There is no single best route. It all depends on the specific business you are in and at what stage are you today.

To suggest a way, share more details about your product / company. Looks like an B2B focused product. - What is it? - Howz the current distribution - Who are these customers (I mean type) - Why has it took 7 years to get 20 customers? Is your product is very heavy to even evaluate? - Why do you need money and where will you put that (hiring, product development, marketing, distribution, etc)

davidfm 12 years ago | |

Wow, thanks. It's predominantly ERP. Customers are top 20 from 1 industry currently (the referral impact) but it's not limited to that trade. It's taken 7 years because I've had to earn a living while developing it and it's a fairly large system. Money is for developer/s so that I can do sales and marketing. What do you mean 'heavy to even evaluate'?

david927 12 years ago |

This seems to me to be right from the MBA textbook chapter called, "What happens if you have no Business Development".

You need to get more customers (and not just from referral, though that's great), and you need more buzz. When you get stronger demand, the capital supply will more easily rise up to greet it.

davidfm 12 years ago | |

I know I can get lots of customers very quickly, I'm turning business away. My issue is letting them down because I don't have the resources to support them. (my previous roles were biz-dev, I do that well)

david927 12 years ago | | |

If you're sure you can get the business to support it, then go to the bank and get a loan. If you aren't able to do that, you're probably stuck slowly bootstrapping. (You're asking for advice, but it's hard to really help because you haven't given a lot of details.) If you have 20 customers after years and it's not profitable enough to hire more developers, I'm guessing you'll have a hard time finding investors. But I don't know. In all cases, I wish you luck and hope you find what it takes to get lift-off. I know how hard it is.

Edit: You might want to take a look at http://www.cofounderslab.com

rwallace 12 years ago | | |

In that case it sounds like your problem isn't lack of capital, it's that you're undercharging. Probably by a lot; technical people, due to whatever quirk of human psychology, almost always massively undercharge.

Given that elsewhere you say your customers are huge companies, I would suggest increasing your prices by one or two orders of magnitude - hard to be more specific without knowing details - and seeing where that puts you.

fraserm 12 years ago | | |

Is your issue that you need cash to fund business expenses or a developer to add features to grow the product?

If the latter and you are confident in quickly adding revenue why not offer some equity/percentage of profit in lieu of salary? If the product is interesting you should be able to find someone willing to take on the risk.

The whoishiring thread would be a decent place to start.

funkyy 12 years ago |

Its hard to give you much detail based on information you have provided. 7 years seems a long time for company earning low income. Do you see yourself in this industry in few years? Do you have possibility to grow? Who is your customers - large companies, smes?

davidfm 12 years ago | |

I've been in the industry since 95, so, yes, I see myself here for the long run. Wouldn't rule out an exit from this business if the opportunity arose though. I believe growth potential is bigger than most of the super-inflated valuations around right now. Current customers are larger end of SME but it's not limited up or down - just been easiest to sell to!

hackerboos 12 years ago |

If you're after VC cash then you should plug your company every chance you get including here.

I can't help you other than that but I will say that you should consider remote workers if it's feasible.

davidfm 12 years ago | |

I've been trying to stay 'under the radar' but maybe you're right, could be time to come out of stealth mode, thanks.

hackerboos 12 years ago | | |

Stealth Mode is a bad idea unless you're somehow legally obliged to keep quiet.