Monday, November 3, 2008

How hard is it to start a startup? (for a hacker)

If you'll read thru blogs online you'll get mostly one answer:
very.

I read many of Paul Graham's essays about startups, and he's got some really great insights.
He has this strong opinion that starting a web startup these days is cheap than ever, and you don't need to raise that much. He actually took it to the extreme with his Y combinator giving young entrepreneurs 5000$ each +5000$ for each member of the funding team. It sums up for no more than 20,000$ for a new startup!

So if it takes only 20k$, it's not such a big deal... You can take a loan from the bank or family, and start your company, avoiding the fuss of getting funded. Not that hard, huh?
Well that's probably not a good idea in my opinion, because you have no mentoring.
Y guys claiming the money they give for startup is nothing compared to the support and consulting. I wonder if the young entrepreneurs agree with them...

So how hard is it to start a startup after you are backed with a venture like Y combinator?
What alternatives young entrepreneurs have these days?

Let me refine:
Hackers&geeks are probably coming with cool ideas for the web startups all the time. They are still young, and very technology oriented, but their experience and thinking is not business or marketing. How do they gain this experience? They can't do it over days. It takes years.
This is a big problem I'm sure many young entrepreneurs (including me...) are facing.
The options I see are:

1. Expanding the funding team with experienced marketing entrepreneur (the best in my opinion)
2. Finding an early stage investor that can consult (i.e Y combinator) - Sounds great but seems to be more for U.S students.
3. Stay with tech-oriented and hope that you are natural born business man. Probably the most common, but too scary for me.

All options are very difficult!
1. How can the hackers find these kind of business/marketing people?
2. Probably the change to get funded are about 1%
3. The chance that the hackers are so gifted is about 1%

Maybe that's the reason ~1% (my estimation) good ideas makes it into companies in the end.
Now it's your turn... What of the above 3 options is best? How to find good business co-founders?
How to get an early stage funding and mentoring?
Looking forward for your input :)

3 comments:

אורי עידן said...

From my own experience, getting the seed fund is the hardest part.
Later on, you still have to prove that you worth it.
After all, in most cases, you don't start making money from the beginning, which means you are going to have another round of investments. The second round is sometimes even harder as you need to show what you have done.
If you need any suggestions regarding opening a startup, contact me in private

Kai Hendry said...

In London there are fairly good events such as Minibar & OpenCoffee to put you in touch with other entrepreneurs & investors.

I heard Israel was the best in the planet for this sort of funding. :-)

But do you really need the money? I suggest doing contracting work where you basically fix an Apache server one day and code the rest of the week.

Ideally need to meet like minded people and live frugally. I think a good business can grow slowly.

sternr said...

I don't agree.

1. Do most startups need the money to... start-up?
No
2. Do most startups fall because of lack in fundings?
Maybe its one of the components, but hardly the most significant.

3. So what IS the reason?
Commercial, Business & Marketing advisors\partners - even been the great engineer that you are (or at least have the potential to be), its simply not enough.

Of course money is an important stage of becoming a real entity but in a different stage and on a different level.

And besides, you compare between the Y-Combinator and early stage investor as if this 2 options are available for every new start-up whereas this is really not the case:
The reason Y-Combinator was made, is because the owner knows how hard (one might say even close to impossible) to get a real investor in the project.

All in all, if you'r in need for a masus... ;)