The full question that we seek to answer in this article is – how do founders pay their bills after quitting their full time jobs but still seeking investment in their startups?
Dave, Startup Founder – Self-funding is key to your success.
This is called “self-funding”. I did this for two years. Basically it goes something like this:
You don’t eat out. Sorry to all my friends for essentially disappearing for about two years. I was just broke, embarrassed at how long it took to get funded, and guilty about spending any money.
You move in with your parents. Then you realise that you’re far too independent to live by someone else’s rules and move out as fast as possible.
You sleep on people’s sofas or airbeds.
You eventually find accommodation that you can afford that’s similar to what you lived in 10 years ago while a student. It’s falling apart but it’s keeps out the cold (mostly).
You stop hanging out with old colleagues. Frankly it’s because you can’t afford to hang out with them anymore. Dropping $100 on expensive cocktails is a luxury you can’t afford anymore. Good bye consulting and banking friends.
You max out your savings, credit cards, and then borrow money from your parents. Twice. Then a few more times. If there is one person that’s to thank for my startup “success” it’s my mum.
You go for cheap dates. If you even date at all. You aren’t looking to invest much in a relationship anyway since your new focus is courting investors.
You get more comfortable mooching off your richer friends. Accepting that drink or meal still feels awful but you mentally add the donor to your “help when rich” list which makes it feel slightly less cheap.
You get secretly depressed. How’s the startup, Dave? Rich yet? No, I’m not rich, my social circle has halved, I owe too many people too much money, I can’t even afford a decent suit to wear to investor meetings, I feel like a total failure… how are you doing?
Then, if you pull through it and wait a really long time, eventually you get funded. You buy a holiday to a Brazilian beach, a new pair of half price shoes, and feel like a complete rockstar for about a month.
Then, you realise you’re taking home the same salary you earned straight out of university 10 years ago (not corrected for inflation) that barely covers your living costs, plus you have to execute on the crazy plan you’ve sold to investors which is just as hard if not harder than getting investment was.
You look at your former colleagues earning 5-10 times your currently salary and realise they work relatively little for a lot more guaranteed money at an age they can use it.
Then you realise that you aren’t in this for either the money nor the lifestyle. You’re in it because you’re borderline crazy and love every minute of this insanely risky adventure.
Lucy D, Startup CEO – A startup is like a marriage.
Being a founder of a startup is like being a newlywed with none of the romance. Whether you’re actually broke or not, live like you are.
Stop going out to eat, cut every recurring bill that isn’t vital (that includes Xbox Live or Eve monthly subscriptions unless you’re building a gaming company that makes it a work necessity).
Decide that streaming Netflix is the closest you are getting to a movie date night. And put off expenses for repairs for things that are conveniences (like when the ice maker quits working or the dishwasher needs replaced). Clorox, dish soap and elbow grease work just fine.
And when you are actually broke, get a job that covers the bills but doesn’t leave you so exhausted or with so little time that you can’t work on your startup.
If you have cofounders, try to find a contract that part of your team works on that covers the expenses of running the company barebones but leaves some of you free to focus on the startup.
Decide the lifestyle you want is to spend every possible moment getting out to revenue … and getting out to revenue is not always the same path as getting out to investment.
Unless you are certain your team and product are ideal for investors, go for revenue first.
It will defray expenses and prove your business concept or drive you towards necessary pivots to find the revenue in your proposition.
I bootstrapped our startup for three years, and our team is just now closing on our seed round.
As a mom of two college kids and one high-schooler (and wife to one of our cofounders) – it has been stressful to continually say no to family vacations, shopping trips, or nice presents, but it has also helped our kids get real really fast.
They’ve learned they can live without whatever stuff they thought they missed out on and have all said they’re glad to have gained a clear understanding of what kind of commitment and sacrifice it takes to build a startup. And two of them want to, anyway – because they also see the upside of it all.
If you’re married to someone who isn’t willing for this kind of sacrifice (because it will always take longer and cost more to launch a startup than you ever think it will), weigh it long and hard before you start.
Because chances are that one of the two won’t survive under this scenario – your startup or your marriage … or maybe both.
I’m lucky to have a serial entrepreneur for a spouse, so we know the long game from previous startups and are willing for it.
And if you’re dating, well, good luck with that.
If you find someone who is willing for the leftovers of your time, not getting nice gifts or taken to nice restaurants and is happy with all of your conversations being about whatever problem you’re trying to solve, you’ve either found the perfect person or someone who just wants to be dating but doesn’t want it to get serious.
This is a bit tongue in cheek, but not much.
It can be done, but you have to want to succeed, to see your solution in the market worse than you want anything else … and that is a huge sacrifice, financially and personally.
I wouldn’t trade what I’ve learned about myself and what we’ve brought to the market to go back to when a paycheck was reliable and paid by someone else.
But I am looking forward to a new dishwasher. I even know the exact model I want – I’ve known for three years. On the upside, it’s a lot cheaper now.
Peter R, Startup Founder – Don’t quit your day job until your business is sustainable.
First and foremost, you don’t quit your job until you generate enough funds from your venture that justifies investing all your time in the business.
Second, you create a service out of your scalable startup product. For instance, if you’re building a software that aims to simplify and automate business planning, then sell consulting services in the meanwhile.
Third, you extend the qualitative research (customer development) period so when you build, you know you’re building something people will use.
Fourth, you focus on what works. Investing on 4 different marketing channels when only one of them is yielding the best results is a waste of money and time.
Fifth, you freelance to pay the bills when needed. Whatever you do well, do it for others and reinvest the gains into your venture and living expenses.
Sixth, you don’t quit your job. Again. Always keep a stream of income until you reach a constant stream of revenue from your product.
Seventh, you set your mind to it for at least 18 months by learning new habits: cook at home, use public transportation, have a beer at home if you wanted a drink, etc.
I’m a bootstrapped founder and my monthly expenses don’t exceed $500. Frankly speaking not because I’m trying so hard but it was a habit that I built from college (still in college. PhD).
Eight, build traction through content marketing way before you execute on your idea. If you build a list of loyal followers, they won’t run away for good if you build a product no one needs.
Buffer founders had 100,000 potential users lined up way before they built the initial version of their product.
Ninth, build relationships with potential investors months before you execute on your idea. This way, when you do, you tell them, and when you have something worth investing in, they’ll be lined up to invest, quicker.