Startups Are Hard

– 2551 words

Startups are hard. No, startups are damn hard.

Contrary to popular belief, there are no clouds of money that float around Silicon Valley and rain on anyone that utters the phrase, "I'm a founder!" Unfortunately, starting a company and raising money is just as hard as ever; it's just that the investors don't have as much leverage as they used to, but they still have a lot.

Most reporting on startups suffers from a terrible case of success bias. Nobody wants to report on a dying startup unless it is to highlight another company that has come along to kill them, but that actually turns into a piece about the better company and not the dying one.

Startups that die rarely talk about it publicly because it is frustrating, embarrassing, and most of the time the people involved want to forget the whole mess and move on rather than sit around talking about the fact that they failed.

Most people don't want to admit that startups are hard, either, because to admit something is hard is to admit that you don't know everything there is to know about a certain topic and to display weakness. If there's one thing you do not want to do as a startup, it's appear weak. Only the strong survive.

But guess what: startups are hard. At times they are soul-crushingly hard. I am not afraid to admit this anymore. I am not afraid to talk openly about it with peers anymore. So, this post serves as a counterpoint to all the recent postings alluding to the fact that anyone can suddenly decide to be a founder and the next week find themselves swimming around in a kiddie-pool full of angel/VC money.

You're Nobody Till Somebody Loves You

In the Valley, you are a Nobody until you are a Somebody. Trying to launch a new product as a Nobody is hard. Trying to get press as a Nobody is very hard because nobody knows who you are (read: nobody cares who you are) and so they don't care about your product. Press outlets are already so saturated with inbound leads from trusted and credible sources that trying to promote yourself as a Nobody will find your attempts mostly routed to an inbox black hole.

Raising money as a Nobody isn't just hard, it is nearly impossible. There are a few major factors that investors look at when making an investment decision. Two big factors are Traction and Revenue, and they are somewhat orthogonal. It's ok if you have impressive numbers on one axis but not the other, but having both is even better.

One other major factor is Social Proof: that is, Are you a Somebody?

Having a track record of past success is a really big deal. This is what allows people to raise money with their name alone. It allows them to walk into a VC office, say "I have a cool idea," and walk out with a fat check. (This is an oversimplification, of course, but it's not too far off.) The fact that the Color team was able to raise $41MM is not a surprise to me; in fact that number seems pretty low given the resources they will need to reach their ambitious goals. Being a Somebody affords you lots and lots of advantages (both in getting press and raising money).

So then, the question becomes, how does a Nobody become a Somebody? You need your first big success to become a Somebody. Having your first big hit as a Nobody is the major bootstrap problem that all new founders will face. The trick is to brute force a successful result in the face of nobody caring about who you are. And that, to me, is the hardest part about startups. It demands superior execution and perseverance in the face of the crap-storm you will endure.

I'm still a Nobody in the Valley. Sure, I have a lot of great contacts, a great network of fellow startup folks, and a great resume of past corporate experience, but all that does not a Somebody make. Until I have a track record of at least one past success, I will continue to be a Nobody.

"Jealousy... is a mental cancer." -B.C. Forbes

Am I jealous of other companies' success? I would be lying if I said no. I am slightly jealous when I wake up and read another story about some company raising a million dollars for some idea that makes absolutely no sense to me, or seeing an acquisition of a company for a product I did not feel was particularly well executed. I am happy for them because they were able to pull off something that I know first hand is very hard. At the same time I am jealous that they were able to figure something out that I honestly haven't been able to yet. The point is, though, I am not just sitting around whining and waiting for my ship to come in. I am actively building my ship from scratch by hand, and one day it will set sail. I am also discovering how to refocus that envious energy into learning from their successful experiences.

Having a Support Group

Startups are grueling, and the only way to stay sane is to have some sort of support group, especially outside of work. Co-founders and employees are of course wonderful for support, but they are also drinking the same kool-aid. Having some friends outside of work to give different perspectives is very valuable. Since we just moved to the area recently, we haven't had time to foster many new or deep friendships. So for me, my greatest supporter is my wife.

My wife is a saint. She has supported me everyday with encouragement. She is my biggest cheerleader. Somedays I am honestly surprised that I don't wake up and find an empty dresser, a missing suitcase, and a letter on the counter. She has sacrificed every bit as much as I have for no other reason than she believes in me. Some days that is the only motivation moving me forward.

Recently my wife found a job after six months of searching. It's right up her alley, and she loves it. This has been a real boon both for her morale and for our bank account. Her paycheck now represents a significant portion of our income, and I recognize this fact. Thanks to her job, I am able to reduce my paycheck and thus give a longer lifespan to my startup.

Someday when this is all over, and assuming the result is that we can afford it, I owe her a month long stay at a 5-star spa.


Startups demand sacrifice. As a sample size of two, here is a list of things my wife and I have sacrificed in order to go out and chase the American Dream:

  • · My well-salaried corporate job working on fun and interesting problems.
  • · A peer group at work that gave me equal amounts of respect even though I was several years their junior.
  • · Low cost of living on the East Coast.
  • · Our three-story townhouse with a huge kitchen and hardwood floors in the 'burbs traded in for a tiny one-bedroom apartment in San Francisco with insane rent (in addition to still paying the mortgage on our house).
  • · My awesome sports car that I loved to drive around the mountains.
  • · Burning through nearly all of our personal savings.
  • · Health insurance.
  • · Vacations (read: time-off, since I could still travel around if I really wanted to, but I am never really "off the clock.")
  • · Monthly contributions to a 401k plan.
  • · Our great church home in Raleigh.
  • · My wife's friends.
  • · My wife's job at UNC.
  • · Nine months living separated from my wife while I went through YC and tried to raise money thereafter.
  • · Sold all of our belongings except our clothes so we could move across the country.
  • · Took on credit card debt for the first time in our lives.
  • · Left my funk band (happily, they found a replacement and are still jamming!).
  • · Losing my hair (well ok, this has been happening for a while...).

Has it all been worth it? If you are expecting me to say "Yes, of course!" you would be wrong. The truth is, it hasn't been worth it at all... yet.

Financially speaking, we are much worse off now than when I took the plunge. Of course the goal is for it to be worth it someday, but it is unclear how long it will ultimately take. In other aspects of my life, it may have been worth it so far, but it is hard to quantify those things. For example, I am now surrounded by a lot of like minded technical people (which is great!), but overall my quality of life has taken a big hit. How long one can take this is a measure of their true grit, but how long that is for me personally remains to be seen.

Startup Depression

In the case of Notifo and Phrygian Labs, Inc (the parent company of Notifo), we had a terrible time fundraising last fall, even when the investing market was starting to get really hot again. You can read Paul's excellent post about some of our experience and lessons learned. The ultimate reality, though, is that we failed utterly at fundraising. We ended up wasting a lot of time. We had dozens and dozens of intros which led to about 40 or so meetings. After spending 3 months and hearing "No" 39 times (this includes all the jerks who never bothered to reply with an answer after our meeting and repeated attempts of contacting them) we decided to just give up raising money. We looked around and felt like everyone around us was raising insane rounds with no problem, and here we were just getting stonewalled. The net effect was that it killed our morale dead.

After hearing, "UR DOING IT WRONG!" so many times, it's hard to think that you're doing anything right. At that point it's very hard to soldier on. One of the things I regret now is that we didn't just carry on in spite of everyone telling us no. We had made a terrible mistake; we had given control to the investors, and they weren't even giving us money! We let them dictate our path with their negative signaling instead of listening to our guts. We had been told, " notifications is a hot space, you'll have no problem raising a ton of money," so many times that when we failed to do so, it made us feel like total idiots.

Looking back, I wish we had carried on full-bore, but I can also remember after we quit fundraising that I felt like such utter shit that I didn't feel much like doing anything at all, much less writing code. There was literally a week when I would just stay in bed all day so I didn't have to face the world. This was the lowest point in my entire life.

The lesson here is, if you are having trouble putting together a round in the first few weeks of actual investor meetings, just say, "screw it," and get back to working ASAP.

On top of all that, in the middle of all that fundraising junk we received an "interesting" acquisition offer from another company. That is another long story for another time, but the end result was that they caught us at our most vulnerable which caused a lot of mental anguish. We basically went back and forth on accepting and rejecting it dozens of times. After seeking advice from Paul Graham about the situation and telling him how much money we had left in the bank he said, "There are starving startups in Africa that don't have that much money. You still have time to make a go of it!" Ultimately, it was not the right offer and we said no.

This whole episode basically set us on a sideways path of non-productivity for the next several months as we flailed around looking for a way to pivot or just reset entirely.

Going Forward

Which leads us to: so what now? Paul and I are not ready to quit. I personally don't really know how to quit. When I make a commitment, there is very little that will stop me from following through, even in the face of adversity. I believe you have to adapt to play the cards you are dealt (this is also why I am a lousy poker player, I rarely know when to fold because I try to force a good hand out of a crummy one). We are willing to see this through to the bitter end if necessary. If this means changing course and trying something new, then sobeit, but while there is money in the bank we will continue on. We have some ideas and are investigating them further.

To that end, Paul and I are going to be part of the Y Combinator Summer 2011 batch in order to reinvigorate ourselves. I am excited for Paul to go through YC with me this time, as I went through YC in Winter 2010 as a single founder. We are doing YC again for all the other reasons, too: the people, the advice, and the motivation you have when you are progressing along with dozens of other companies at a rapid clip. There might be a few of you wondering if we are doing it for the "Yuri money," but we don't even know if we are eligible for that since we are not a new YC company. If we get it, that's just an added bonus, but we are very eager to just get plugged back in.

There are big changes ahead for Phrygian Labs. What that means in practice is still unknown, but we are still motivated and determined to succeed.


So, what is the point here? The point is that startups are still hard even if nobody is spending time discussing that fact. Admitting this fact and realizing that all other startups are in your same boat is liberating. Having other friends who are in startups that are willing to openly share their hardships is cathartic. It helps you realize you are not alone when it seems like everyone else is succeeding. Of course it looks like everyone else is succeeding; every company has a duty to seem like they are doing fine from the outside, otherwise everyone (investors, press, and most importantly customers) will lose all confidence in them. Every company has this facade that they are doing really well, and this creates the very convincing illusion that you are the only ones suffering. The reality is, every startup is basically screwed in one way or another. The fact that a large majority of startups fail is a testament to how hard they really are. If startups were easy, everyone would be running them.

Thanks to Paul Stamatiou, Zain Memon, Lloyd Armbrust, Paul Biggar, Jon Dahl, and Trevor Blackwell for proofreading drafts of this post.

Further discussion in the comments below, or on Hacker News.

— Fin.
Tagged: startup ycombinator tech

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