The worst case scenario happening when starting a company | Hacker News Reader

The worst case scenario happening when starting a company

maximise.dk

27 pointsmaxklein13 comments

This happened to me around 1½ years ago, and I just thought I'd post a follow-up to a very negative story here.

After this whole thing fell apart I sat down and thought about what I could have done differently, and how it could have made our chances of success better. A lot of the things that happened (break-in, heart attack, etc.) were black swans that probably can't be avoided in the future. I did learn some important lessons though.

- Make sure your co-founders are as engaged as you are. I would even go as far as to say that if you can't find someone that really believes in the idea and is willing to put some serious work behind it it's better to go it alone.

- Make sure expectations are squared off, and you don't oversell the promise of riches. Most startups fail, and your co-founders need to know this. Otherwise you'll end up with broken friendships, which is never a good thing.

- Learn to code. When I looked back I saw that if I had been able to code I would have been a much better manager and founder, and would probably have been able to do a lot of the stuff that gave us so much trouble myself. I've since become pretty proficient at PHP, MySql and CSS. And I'm learning python and javascript.

The stuff I'm working on now is coded by myself, and I'm doing it alone. Not because I don't want a co-founder, far from it, but I don't want to have a co-founder that drags the whole venture down.

> A lot of the things that happened (break-in, heart attack, etc.) were black swans that probably can't be avoided in the future.

Neither a break-in or a heart attack is a black swan—people take out insurance against both all the time. If you're working with an organization, rather than an individual contractor, they most certainly have measures in place to ensure you never feel the brunt of such an event.

When your co-founders have heart attacks and break-ins I would consider it abnormal. Sure you can insure your way out of it, but it's a constant tradeoff. A normal insurance (which we had) didn't help much since it only covered new equipment after the breakin, and didn't cover anything in the heart-attack case since we weren't working for a client with a contract. As a startup you have limited time and money and you've got to decide where to spend it. Large corporations have the luxury of being able to have all-covering insurance policies,redundancy, policies for replacing employees, well-established back-up plans, etc. Most startups don't.

The very things that make a startup cheap are also what make it vulnerable.

If you have an idea but not the skills to execute it, you will most likely need a company (with contract and all) to deliver the product. Hiring friends as designer and as programmer to work remote and for shares of the company has a high chance of disaster, especially if you are not a developer yourself.

One thing that might help could be setting up a schedule where you work together at a co-working place or your local hacker club, etc.

Right on. That's one of the things I learned from this.

Thanks for the story, I read it with great interest because I can really relate (like many around these parts I'm sure).

I'm glad to see that you found the energy to see your project through until the end, even if it didn't work out eventually. It probably cost you quite a bit, but that's the name of the game. You can't know until you try (well that's what I keep telling myself these days).

You're right that the combination of friends and work especially is a delicate one, something that I did not foresee either (working on my first big project).

Also I agree with your advice, about needing co-founders that are as engaged as you are. However this is a very hard thing to achieve. Not everyone is as crazy as we are. And communicating a vision is a very hard thing to do as well.

Although it might not seem so for someone with not much prior experience with coding, the simplest thing to do is still to have a go at it alone, at least in a first stage. It's probably easier and less risky than managing a team to execute your crazy idea for you.

Anyway, don't leave us hanging! What is the url of your website?

The url is http://localhost/ :-)

No seriously, since there was no income model, and I was generally quite fed up and didn't see a future of the project I didn't see any value in leaving it up.

"First, the sites I was using to draw in users blocked my profiles ... worse they had put mechanisms in place that prohibited me from making new profiles."

I want to know what this guy was doing to get banned like this; such treatment is usually reserved only for the most serious of spammers.

Basically the plan was to use some of the existing social media sites (One in particular that was large in our target market) and locate the opinion leaders on that site by analysing how many friends they had, etc. We then personally contacted around 100 people and tried to talk them into helping us getting off the ground.

When they found out that a competitor was using their network to garner interest for a competing site they used every means at their disposal to shut us out. Understandable, I would probably have done the same thing.

     Second the income model we were using was made illegal 
     because of a new law that was hurried through parlaiment 
     due to issues unrelated to us. This was the definitive 
     blow. With no near-term prospect of turnover in a 
     country where it isn't easy to go out and get external 
     investors aboard there's nothing more you can do.

What kind of business model was it? Can't really think of anything "illegal" you could even do with a social network website

The businessmodel was based on overtaxed SMS services. You'd be able to sign up for updates about parties, where your friends were, etc. and each SMS would cost around 20 cents. What made this work well was the fact that the overtaxed SMS is initiated by the server meaning that users that are signed up can receive a SMS and the 20 cents are immediately drawn from their mobile account. We had a a system set up so that people had to not only opt-in, but also accept a SMS when they signed up for this so that they wouldn't feel cheated. We had other things such as a monthly maximum, etc. set up to make sure everyone was OK with it.

As you'll quickly realise the fact that overtaxed SMS services are initiated from the server can be misused - get a bunch of random phone numbers and send them all a SMS that costs $10. Someone did this, and the law was quickly changed so that a load of back-and-forth SMS'es were required to make the payment go through. Since each SMS costs money to send it ended up actually costing money to have this service running.

The original post mentions "overtaxed" SMS messages, so maybe their model involved some kind of money transfers between users. This could have been rendered illegal as a side effect of legislation that attempted to limit text message lending.

(SMS loans may not be familiar to Americans. They're a widespread and very profitable business in some European countries, and there have been attempts to curtail them through legislation due to perceived ethical concerns. The idea is that you can get a loan by sending a text message, and the money is transferred directly to your account -- great when you run out of money while drinking on the town... The fees are extremely high compared to any other kind of loan, of course.)

Edit -- my guess was wrong :) The original poster provided the details.

Damn Max!

But hey, if you're going to fail, might as well do it spectacularly. I can't imagine a more horrendous way to fail than giving all your users a surprise charge of $200. I guess you could break into their house and kick them in the groin, but I'm not sure that would be worse. :)

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