Ask HN: When doing a startup, what is the best way to find capital? | Hacker News Reader

Ask HN: When doing a startup, what is the best way to find capital?

2 pointsjlgosse3 comments

I mostly want to ask this question out of curiosity, but also to help people out in a similar situation.

The situation would be similar to this:

I have a great idea which I know would be successful, but zero capital to make it happen. I need N number of developers, and N number of people to work on marketing and promotion. I also need N amount of dollars for hardware and office space in a downtown location.

If a person wanted to incorporate MyCompany, and then look for bank loans or funding, etc, what would be the best way to do it? I know that most businesses never actually get funding from investors, and a lot will just get a bank loan. If you were to go this route, what criteria are needed in order to get a loan for say, $300k? If the business ends up tanking, what happens to that debt? Who is responsible?

Now, say if you do manage to get funding, how does this usually happen with regards to exchange of capital? What happens if the company tanks, and the $300k in funding is lost?

I'm basically trying to conceptualize what sort of issues arise when raising money in both directions. Who is responsible? What do you need to do to secure capital? Who do you speak with? Etc.

Sorry if this is worded strangely, but I'm not sure how else to explain it. I would probably never even think about going a bank loan route if I was responsible for the money, but I hear that when you incorporate your company, you are no longer personally responsible for any losses.

Hopefully someone has some insight or resources on this topic, as it has always been in the back of my mind.

Thanks.

"need N number of developers, and N number of people to work on marketing and promotion. I also need N amount of dollars for hardware and office space in a downtown location."

Are you sure about all of these expenses from day one? The reason startup accelerators like yCombinator are thriving now with small investments is that SaaS, cloud computing and open source have made it much cheaper to start a company, especially for web companies.

You can get a cluster of cloud servers for $100/mo. You can hire the best developers from across the US and around the world to work remotely, eliminating the need for a costly office space. You can advertise with PPC and CPA for pennies per eyeball, so you can quickly scale up or down marketing when you need to.

You should be able to get version 1 or a beta of your product completed in a few months, for a few grand. Then you have something to take to angels and VC's to get $300k. That way, if the company tanks, you're not on the hook for a business loan.

> I would probably never even think about going a bank loan route if I was responsible for the money, but I hear that when you incorporate your company, you are no longer personally responsible for any losses.

wow, if you're that confident about your product why wouldn't you put your neck on the line? Note: personal debt sucks.

Build an early cheap prototype for, maybe, under $10k - use elance.com for example, and get a few users, prove the ARRR model and raise an angel round off that. Or, apply to YC with a technical co-founder.

If thats too much $$$, build a great powerpoint deck explaining exactly what you're doing, why its great, who the customers are and why they'll pay. oh and how you'll get those customers. and why you can do it but no one else. then get violated by early stage investors as you raise money off a product which doesn't exist and you're an unproven solo founder.

the short answer to "i need capital" = build something people will pay for. can't program? learn.

You're almost certainly going to need to personally guarantee the loan until your business is sufficiently established to be it's own guarantor.

Just because you fill out a a bit of paperwork for incorporation does not mean you'll be able to secure large loans without personal liability (until, obviously, much later stages).

Reply on news.ycombinator.com