Comment by Udo | Hacker News Reader

Comment by Udo | Hacker News Reader

Parent Full thread

I believe you might be underestimating the time it takes to become profitable. You say you're burning 20K per month, that is one hell of an operating budget if you're basically two guys with almost no customers. You said you started a new campaign but results are trickling in slowly, which is normal. It will take time to build a brand and a customer base. Banking on revenue being "just around the corner" is likely to get you into trouble. You're only allowed to give a concrete time frame for profitability if you already have a graph with a growth curve on it that will cross the red line with a decent amount of confidence at a predetermined point in the future. If you're pretty much at zero revenue right now, you cannot draw this line because you don't know the growth factor yet. Sure, a few companies do take off like rockets, but these are outliers that cannot be used to actually make plans for the future.

Sorry to be a party pooper on two accounts, but I don't think this angel guy is going to solve your problems either. One can already sense the tension between you and him, imagine what it's going to be like once he takes over the operation. And when he discovers that this 20K/month hole cannot be plugged, he'll be very pissed and you might suddenly find yourself fighting on more than one front just to make it through somehow.

I don't want to be just negative, but it's hard to give advice without knowing all the facts. In your place I'd probably look into these things:

Can the money drain be reduced to a fraction of what it is now? If that leads to a reduction in service quality, you need to ask yourself if the majority of the expense is actually going into the core offering that customers want from you? Can the scope of this thing be reduced somehow? What do customers actually need from you (concentrate on one core expectation if possible). Can you find money elsewhere, for example by making a business plan and presenting to a VC? Take a very critical look at your revenue expectations: are there any hard numbers you can work with and plan for? Can you partner up with a company in some form of mutually beneficial agreement, possibly reducing your expenses or at least to help you get in contact with a pre-existing customer base?

Thanks for the candid thoughts, Udo.

Some brief comments on your response:

- Unfortunately, we have some business-critical costs we incur, so can't do a full slashing. However, we're confident that a couple key vendors that our business relies on will defer payment for a couple months, representing a 50% reduction to burn. We could probably also reduce general costs by 10-20% as well with some real belt-tightening.

- You're probably right about the revenue projections, but we do have our reasons to be optimistic. At minimum, some quick revenues will help make us that much more compelling to other investors if we chose to walk from this deal and throw a hail mary trying to land another investor in the 2 months we'd have to put a deal together.

- We're placing a lot of resources in quickly brokering a distribution deal with a marquee brand in our space. We're extremely confident that we will have something in place in the next two months if our progress thus far is any indication. Landing any of these deals would likely solve our immediate-term money woes, at least enough to stop the hemorrhage.

The question basically comes down to:

Do we take a deal on the table knowing that it will give us 10 months of certain life even though it doesn't feel right in the gut and doesn't even look that good on paper by most measures? Or do we roll the dice, go into bleed mode, and try and land something in the 60 days we'd have to do it (starting Monday), knowing that it's a horrible time of year to get anybody's attention?

Thanks again for the thoughtful response, Udo.

You should probably take what I write with a grain of salt, because I have seen so much stuff go wrong over the time, I tend to be overly cautious.

My (admittedly somewhat unqualified) advice would be:

- Go ahead and slash costs by as much as you can. And then some. If vendors simply defer payment instead of waiving/reducing it, things can get _very_ dangerous, so make sure you incorporate a limited liability company as a shield if you haven't already done so. And it wouldn't hurt to talk to some lawyers.

- If your gut tells you not to partner up with this guy (and essentially give him your company in the process): don't do it! If it feels bad now, it will only get worse! Look for a real VC and/or possibly a bank deal. Maybe you can set up something with those partners who already operate in this space?

- If you currently have no customers, maybe it's worth considering to hold off on buying these external services until you really need them. This may or may not be applicable to your situation, I don't know. But if the only reason for using these vendors right now is to give realistic demos and to have infrastructure in place just-in-case, it might be worth putting it on hold until you launch for real.

Reply on news.ycombinator.com