6 ms·

Oh man. I bootstrapped a business on the side, and quit my dajob when it got to the point where it could support me (which is to say, could pay me like 1/4 of

by lsc 7y ago

Oh man. I bootstrapped a business on the side, and quit my dajob when it got to the point where it could support me (which is to say, could pay me like 1/4 of my market value in silicon valley) - One of the clearest mistakes I made that could have made the company opportunity cost profitable had I not screwed it up was that I was conserving capital while I had the opportunity to grow really fast. For a short period of time, because of a blog post someone else wrote, I had a huge waiting list. I was building servers one at a time, using the money from the first to pay for the next one. A lot of that waiting list dried up while they were waiting for me; There is a reasonable chance I would have been 5x bigger at that point had I maxed out my credit and bought servers all at once. And if I was wrong? if I maxed out my credit and went bankrupt? I'd still be better off than I was in reality. 10 years at 1/4 salary is... brutal in a way that bankruptcy isn't. (I think. I've never actually gone bankrupt.) I guess my real point here is that you need to time box it. At some point, you need to give up. I've never worked with VC, but I would assume that it would act as something of a forcing function here. I think being disciplined about "always take a better job if you are offered one" might also work.

fyp 7y ago
> For a short period of time, because of a blog post someone else wrote, I had a huge waiting list Why is this short opportunity window unique? So you realized you missed this window but then the environment was already one where this "5x" demand no longer existed? If that's the case would it have been wise to ramp up that quickly? Maybe you did the right thing.
- hinkley 7y ago
  Let’s say he took out a bank loan to build 50 machines real quick. He probably would have sold them quickly and been able to build the next 50 and pay the bank at an accelerated rate, and everything would have been fine. He’d eventually have a higher customer base and slightly higher volume. Where you’re correct is that people look at this in hindsight and say things like what I said. But in the moment they may think this is the big chance, hire a few staff to build them faster and get stuck with a bunch if liabilities when demand ramps down while they were hoping it would continue going up. People who don’t believe in their business fail, some never even start. But believing your own hype is the best way to fail spectacularly and I expect it’s hard to see while it’s happening. Even as an employee I’ve looked back a few times and wondered what the hell I was thinking buying into a failed idea.
- koheripbal 7y ago
  Possibly because he had exhausted his professional network of contacts who trust him enough to put an order with him.
xwdv 7y ago
Why would you go bankrupt? If you have a growing business making money it should be fairly straightforward to get a loan under your business name.
- lsc 7y ago
  >If you have a growing business making money it should be fairly straightforward to get a loan under your business name. this is not my experience, not without a personal guarantee or collateral that holds it's value better than servers. (Leasing servers was also an option that would have made sense then. Most of the leasing deals I was offered that didn't include personal guarantees were two year leases wherein I paid about as much as the servers would cost up front over two years. It would have made sense in that case, but it's super expensive compared to buying servers)
  - hpcjoe 7y ago
    This. Loans for small business require personal guarantees. If you are at a point that you need the capital that badly that you cant leverage it from existing cashflow, and VCs put you into their "maybe later" bucket (e.g. "no" for the rest of us), then requiring a personal guarantee is a signal for you. The signal means you should consider whether or not you should continue your endeavor, as the bank values your net worth and its leverage, far more than it values your business. I've been down this road. I did not answer this question properly. Doesn't matter how much you believe in yourself, if the bank wants a personal guarantee, they dont really believe in your vision. My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain.
    - lsc 7y ago
      >My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain. My own personal view, if I could go back in time, would be to tell myself to go all in. I think it had a shot, and I needed to take that shot. I still think risking a bankruptcy to get a better chance at that would have been worth it. I don't regret trying. I needed to try. And I think it was a near-run thing. I could have made it. I feel like there are several points here where if i zigged instead of zagging, I'd have done really well. I just regret that I spent so long at it, without much success. A spectacular flameout involving business and personal bankruptcy after three or five years would have been far better for my long-term financial health than just slogging along at 1/4 wages for a decade.
tome 7y ago
I don't understand. It seems like you were pressed for time, not for cash. How could you have served your customers quicker with more money?
- codetrotter 7y ago
  The way that I read what they said here: > I was building servers one at a time, using the money from the first to pay for the next one. Is that they were financing the purchase of each new server with the money that they got paid by their customers. So they had to wait a certain amount of time until they had enough money to build each new server. If instead they had bought multiple servers at once, on credit, they could have started serving more customers much faster.
  - lsc 7y ago
    Yup. We had a pretty good (20%) discount if you paid for a year up front that customers often used, so it wasn't slow to save up the cash, but it serialized a lot of processes that could have been parallelized. Testing one server well takes a few days. Testing 100 servers well takes a few days. I mean, there certainly was also a time aspect that was independent of that serialization, but a lot of that was also saving money. I mean, I personally argue that buying servers from parts is less time than negotiating a good deal on an assembled server, but we certainly could have gotten tested servers out faster if we were willing to shovel more money at someone. Maybe even if we still serialized the purchase.
    - t34543 7y ago
      Sounds like similar challenges with hosting companies. Huge capital float and long payback period. If you were selling/leasing compute commodities you were probably more of a logistics company vs tech.
lwb 7y ago
Your comment is all past tense -- are you still working on this business?
- lsc 7y ago
  nope. Complaining while you are working at a company is generally bad form (though it was something I did a lot) - I'm working deep in the bowels of a faang company and it is so cushy and so remunerative in comparison. I don't even carry a pager anymore! I get vacations! I kinda miss the physical servers, but I own some as a hobbyist. One of the worst parts, though, was that I felt like getting my first job after working on my own company for a while was... much harder than it has ever been for me to get a job. Like getting a job after being unemployed for a long time, which felt like a huge insult after how hard I worked. I personally think it's actually a much bigger risk to do this when you are young (I mean, if you otherwise have the opportunity, like I did, to work a corporate job that let you max a 401K) than when you are older, once you have maxed that 401K as a younger person.
  - o-__-o 7y ago
    Wow I did both, started young and failed, got employed by fortune 500s, started up again with lots of spare cash. I haaaate working for anyone else after tasting success, but my FAANG salary and 401k and stock options simply can’t match the 100 cold calls a day startup life
jv22222 7y ago
There’s always a risk to give advice via blog posts and such, and also to decide which advice to listen to. I’ve been on both ends of the stick and can honestly say it sucks to give advice that didn’t work out for someone, or receive it.
robomartin 7y ago
Reminded me of a similar experience I had approximately 15 years ago. I had a 3:00AM conversation with Steve Jobs (long story) about something I was trying to do with Apple. This led to being invited to meet with an engineering and marketing team in Cupertino. Without saying a thing, a few days after our meeting Apple added a link to our website from the first page of one of their main product pages. Traffic instantly went from a few thousand hits per day to hundreds of thousands per day. It didn’t let-up for perhaps a year. We were not prepared for this at all. It was a mad scramble to shift, pivot, adapt, evolve and attempt to rise up to the opportunity provided by this unexpected move. I don’t think I slept for a whole year.
- gregsadetsky 7y ago
  I’d love to hear more about this, if you don’t mind? :)
- davidtsong 7y ago
  sounds wild, would love to hear about this as well
  - robomartin 7y ago
    Well, I'll keep it simple. This was before iPhone times. Apple, among other things, was focusing on the applications of its product in the media-related industries. I launched a self-funded startup to develop hardware (FPGA, embedded, real-time image processing, software) for this industry segment. After a year of very hard work I was able to emerge out of the garage with a fairly sophisticated product that was very well received. Only one problem: The product could work much better if Apple would only modify their newly-introduced Apple HD Cinema Display. I had already hacked the display and developed the modifications, I just needed Apple on board. I tried in vain to make contact with a number of people at Apple. I was getting nowhere. My work schedule was nuts, pretty much 18 hour days, 7 days a week. That's what you do when you are launching a business, particularly if you put it all on the line and have no outside funding or support. Which means it was normal for me to be in the garage up to 3 or 4 in the morning coding, designing hardware, or just generally working on the product or business. One morning, out of frustration, I decided to hunt down Steve's email address and send him a note. I found a plausible candidate and sent an email at 2:30 in the morning. I still remember the subject line: "Trouble doing business with Apple". That was followed by just a sentence or two which, frankly, I can't remember. Not much in the way of details. Clicked "Send" and went back to coding. Around 3:00AM I get a short email back: "What's the problem? -Steve" I sat there staring at that email for some time. I finally decided that this was either someone having fun at my expense or the real guy. No harm in trying. I typed-up a couple-page response with as much detail as made sense and sent it. I got a reply within thirty minutes or so. A couple of questions, which I answered. The conversation ended with another short email: "Thanks for reaching out. -Steve". It's was 4:30 AM or so. No point sleeping. I couldn't. Later that afternoon I got a call from a VP just below Steve. He said "Steve asked me to take care of this for him". We spoke for about 45 minutes. The following day he invited me to come out to Cupertino, meet with their engineering team, explain how to fix the problem and discuss a few other non-engineering items. Fast forward to a few months later, I designed an iteration of our product per Apple's request and we launched it at the Apple booth during one of the industry events. Pretty crazy ride. Like I said in my prior post, I don't think I slept in a year.
amelius 7y ago
> 10 years at 1/4 salary is... brutal in a way that bankruptcy isn't. Perhaps you should remind yourself that plenty of people in your age group have salaries that are less than 1/4 of a silicon valley salary, and they think it is normal.
- vasco 7y ago
  You should compare yourself to your own potential in the industry you're in, otherwise you're just capping your pay for no reason.
  - learc83 7y ago
    Sure if your asking yourself "how much money should I ask for?" or "how much money can I make if I do x?". Not if you're reflecting on how you spent the last 10 years.
- dyarosla 7y ago
  Sure but that’s not quite relevant to the opportunity cost the OP was measuring against.
scarface74 7y ago
Why are you “building servers”? Was there something about your business that precludes you from using a hosted solution?
- procinct 7y ago
  I’m guessing he means provisioning servers.
  - atsaloli 7y ago
    He WAS the hosting solution. - https://prgmr.com/about.html https://prgmr.com/about.html - https://prgmr.com/~lsc/ https://prgmr.com/~lsc/
    - scarface74 7y ago
      Makes sense. Before I commented, I looked at his profile to see if he had information about his previous companies.
    - sn 7y ago
      Yes, he was. I, along with Alan Post, took over prgmr from Luke. We're hiring another developer full-time in January.
      - atsaloli 7y ago
        Glad to hear it's still a going concern! :)
steve_taylor 7y ago
This directly contradicts the generic advice of lean startup pundits that it’s a waste of time and resources to be prepared for a sudden influx of customers. The same tired old advice is always trotted out: that you should sell first and build later and do things that don’t scale. Thank you!
bob33212 7y ago
Live and learn. Ironically, I think a lot of people who took VC money will have the opposite experience. "If only they had more runway they could have found growth." I don't think that they are mutually exclusive. Some products take a long time to get organic growth and some products have a narrow window where they could blow up.
pinouchon 7y ago
Funny how this is in stark contrast with PG advice of staying alive (http://www.paulgraham.com/die.html http://www.paulgraham.com/die.html)
- s_dev 7y ago
  I don't see this the opposite of PG advice but rather PG advice. PG also says to aim initially for Ramen profitablity (cover your rent and food bills) and then stay there till you figure a way to grow exponentially. Which is what OP did.
atsaloli 7y ago
Luke, you've been an inspiration for years. It's a lot easier to hold a regular job than it is to take a business from idea to execution... as you well know!

by lsc 7y ago

fyp 7y ago

> For a short period of time, because of a blog post someone else wrote, I had a huge waiting list Why is this short opportunity window unique? So you realized you missed this window but then the environment was already one where this "5x" demand no longer existed? If that's the case would it have been wise to ramp up that quickly? Maybe you did the right thing.

hinkley 7y ago
Let’s say he took out a bank loan to build 50 machines real quick. He probably would have sold them quickly and been able to build the next 50 and pay the bank at an accelerated rate, and everything would have been fine. He’d eventually have a higher customer base and slightly higher volume. Where you’re correct is that people look at this in hindsight and say things like what I said. But in the moment they may think this is the big chance, hire a few staff to build them faster and get stuck with a bunch if liabilities when demand ramps down while they were hoping it would continue going up. People who don’t believe in their business fail, some never even start. But believing your own hype is the best way to fail spectacularly and I expect it’s hard to see while it’s happening. Even as an employee I’ve looked back a few times and wondered what the hell I was thinking buying into a failed idea.
koheripbal 7y ago
Possibly because he had exhausted his professional network of contacts who trust him enough to put an order with him.

xwdv 7y ago

Why would you go bankrupt? If you have a growing business making money it should be fairly straightforward to get a loan under your business name.

lsc 7y ago
>If you have a growing business making money it should be fairly straightforward to get a loan under your business name. this is not my experience, not without a personal guarantee or collateral that holds it's value better than servers. (Leasing servers was also an option that would have made sense then. Most of the leasing deals I was offered that didn't include personal guarantees were two year leases wherein I paid about as much as the servers would cost up front over two years. It would have made sense in that case, but it's super expensive compared to buying servers)
- hpcjoe 7y ago
  This. Loans for small business require personal guarantees. If you are at a point that you need the capital that badly that you cant leverage it from existing cashflow, and VCs put you into their "maybe later" bucket (e.g. "no" for the rest of us), then requiring a personal guarantee is a signal for you. The signal means you should consider whether or not you should continue your endeavor, as the bank values your net worth and its leverage, far more than it values your business. I've been down this road. I did not answer this question properly. Doesn't matter how much you believe in yourself, if the bank wants a personal guarantee, they dont really believe in your vision. My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain.
  - lsc 7y ago
    >My best advice 3 year post blow up. It ain't worth it. Move on. You will save yourself pain. My own personal view, if I could go back in time, would be to tell myself to go all in. I think it had a shot, and I needed to take that shot. I still think risking a bankruptcy to get a better chance at that would have been worth it. I don't regret trying. I needed to try. And I think it was a near-run thing. I could have made it. I feel like there are several points here where if i zigged instead of zagging, I'd have done really well. I just regret that I spent so long at it, without much success. A spectacular flameout involving business and personal bankruptcy after three or five years would have been far better for my long-term financial health than just slogging along at 1/4 wages for a decade.

tome 7y ago

I don't understand. It seems like you were pressed for time, not for cash. How could you have served your customers quicker with more money?

codetrotter 7y ago
The way that I read what they said here: > I was building servers one at a time, using the money from the first to pay for the next one. Is that they were financing the purchase of each new server with the money that they got paid by their customers. So they had to wait a certain amount of time until they had enough money to build each new server. If instead they had bought multiple servers at once, on credit, they could have started serving more customers much faster.
- lsc 7y ago
  Yup. We had a pretty good (20%) discount if you paid for a year up front that customers often used, so it wasn't slow to save up the cash, but it serialized a lot of processes that could have been parallelized. Testing one server well takes a few days. Testing 100 servers well takes a few days. I mean, there certainly was also a time aspect that was independent of that serialization, but a lot of that was also saving money. I mean, I personally argue that buying servers from parts is less time than negotiating a good deal on an assembled server, but we certainly could have gotten tested servers out faster if we were willing to shovel more money at someone. Maybe even if we still serialized the purchase.
  - t34543 7y ago
    Sounds like similar challenges with hosting companies. Huge capital float and long payback period. If you were selling/leasing compute commodities you were probably more of a logistics company vs tech.

lwb 7y ago

Your comment is all past tense -- are you still working on this business?

lsc 7y ago
nope. Complaining while you are working at a company is generally bad form (though it was something I did a lot) - I'm working deep in the bowels of a faang company and it is so cushy and so remunerative in comparison. I don't even carry a pager anymore! I get vacations! I kinda miss the physical servers, but I own some as a hobbyist. One of the worst parts, though, was that I felt like getting my first job after working on my own company for a while was... much harder than it has ever been for me to get a job. Like getting a job after being unemployed for a long time, which felt like a huge insult after how hard I worked. I personally think it's actually a much bigger risk to do this when you are young (I mean, if you otherwise have the opportunity, like I did, to work a corporate job that let you max a 401K) than when you are older, once you have maxed that 401K as a younger person.
- o-__-o 7y ago
  Wow I did both, started young and failed, got employed by fortune 500s, started up again with lots of spare cash. I haaaate working for anyone else after tasting success, but my FAANG salary and 401k and stock options simply can’t match the 100 cold calls a day startup life

jv22222 7y ago

There’s always a risk to give advice via blog posts and such, and also to decide which advice to listen to. I’ve been on both ends of the stick and can honestly say it sucks to give advice that didn’t work out for someone, or receive it.

robomartin 7y ago

Reminded me of a similar experience I had approximately 15 years ago. I had a 3:00AM conversation with Steve Jobs (long story) about something I was trying to do with Apple. This led to being invited to meet with an engineering and marketing team in Cupertino. Without saying a thing, a few days after our meeting Apple added a link to our website from the first page of one of their main product pages. Traffic instantly went from a few thousand hits per day to hundreds of thousands per day. It didn’t let-up for perhaps a year. We were not prepared for this at all. It was a mad scramble to shift, pivot, adapt, evolve and attempt to rise up to the opportunity provided by this unexpected move. I don’t think I slept for a whole year.

gregsadetsky 7y ago
I’d love to hear more about this, if you don’t mind? :)
davidtsong 7y ago
sounds wild, would love to hear about this as well
- robomartin 7y ago
  Well, I'll keep it simple. This was before iPhone times. Apple, among other things, was focusing on the applications of its product in the media-related industries. I launched a self-funded startup to develop hardware (FPGA, embedded, real-time image processing, software) for this industry segment. After a year of very hard work I was able to emerge out of the garage with a fairly sophisticated product that was very well received. Only one problem: The product could work much better if Apple would only modify their newly-introduced Apple HD Cinema Display. I had already hacked the display and developed the modifications, I just needed Apple on board. I tried in vain to make contact with a number of people at Apple. I was getting nowhere. My work schedule was nuts, pretty much 18 hour days, 7 days a week. That's what you do when you are launching a business, particularly if you put it all on the line and have no outside funding or support. Which means it was normal for me to be in the garage up to 3 or 4 in the morning coding, designing hardware, or just generally working on the product or business. One morning, out of frustration, I decided to hunt down Steve's email address and send him a note. I found a plausible candidate and sent an email at 2:30 in the morning. I still remember the subject line: "Trouble doing business with Apple". That was followed by just a sentence or two which, frankly, I can't remember. Not much in the way of details. Clicked "Send" and went back to coding. Around 3:00AM I get a short email back: "What's the problem? -Steve" I sat there staring at that email for some time. I finally decided that this was either someone having fun at my expense or the real guy. No harm in trying. I typed-up a couple-page response with as much detail as made sense and sent it. I got a reply within thirty minutes or so. A couple of questions, which I answered. The conversation ended with another short email: "Thanks for reaching out. -Steve". It's was 4:30 AM or so. No point sleeping. I couldn't. Later that afternoon I got a call from a VP just below Steve. He said "Steve asked me to take care of this for him". We spoke for about 45 minutes. The following day he invited me to come out to Cupertino, meet with their engineering team, explain how to fix the problem and discuss a few other non-engineering items. Fast forward to a few months later, I designed an iteration of our product per Apple's request and we launched it at the Apple booth during one of the industry events. Pretty crazy ride. Like I said in my prior post, I don't think I slept in a year.

amelius 7y ago

> 10 years at 1/4 salary is... brutal in a way that bankruptcy isn't. Perhaps you should remind yourself that plenty of people in your age group have salaries that are less than 1/4 of a silicon valley salary, and they think it is normal.

vasco 7y ago
You should compare yourself to your own potential in the industry you're in, otherwise you're just capping your pay for no reason.
- learc83 7y ago
  Sure if your asking yourself "how much money should I ask for?" or "how much money can I make if I do x?". Not if you're reflecting on how you spent the last 10 years.
dyarosla 7y ago
Sure but that’s not quite relevant to the opportunity cost the OP was measuring against.

scarface74 7y ago

Why are you “building servers”? Was there something about your business that precludes you from using a hosted solution?

procinct 7y ago
I’m guessing he means provisioning servers.
- atsaloli 7y ago
  He WAS the hosting solution. - https://prgmr.com/about.html https://prgmr.com/about.html - https://prgmr.com/~lsc/ https://prgmr.com/~lsc/
  - scarface74 7y ago
    Makes sense. Before I commented, I looked at his profile to see if he had information about his previous companies.
  - sn 7y ago
    Yes, he was. I, along with Alan Post, took over prgmr from Luke. We're hiring another developer full-time in January.
    - atsaloli 7y ago
      Glad to hear it's still a going concern! :)

steve_taylor 7y ago

This directly contradicts the generic advice of lean startup pundits that it’s a waste of time and resources to be prepared for a sudden influx of customers. The same tired old advice is always trotted out: that you should sell first and build later and do things that don’t scale. Thank you!

bob33212 7y ago

Live and learn. Ironically, I think a lot of people who took VC money will have the opposite experience. "If only they had more runway they could have found growth." I don't think that they are mutually exclusive. Some products take a long time to get organic growth and some products have a narrow window where they could blow up.

pinouchon 7y ago

Funny how this is in stark contrast with PG advice of staying alive (http://www.paulgraham.com/die.html http://www.paulgraham.com/die.html)

s_dev 7y ago
I don't see this the opposite of PG advice but rather PG advice. PG also says to aim initially for Ramen profitablity (cover your rent and food bills) and then stay there till you figure a way to grow exponentially. Which is what OP did.

atsaloli 7y ago

Luke, you've been an inspiration for years. It's a lot easier to hold a regular job than it is to take a business from idea to execution... as you well know!