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While this all may be a good plan it is not the only way to go. My startup, engineyard.com is only two years old. But we built something people wanted and start

While this all may be a good plan it is not the only way to go. My startup, engineyard.com is only two years old. But we built something people wanted and started selling it to them in September of 2006 with only $120k seed money raised from friends and family. We were profitable by January 2007 and had 50% growth month over month for most of 2007. We could have just left it at that but we had plans to become an open source company as well as a hosting company. Developing new software projects like Rubinius, Merb and Vertebra take time and money to pay top notch engineers. So we decided to take a gamble on going big and we took some VC money. The thing is, we already had a profitable business and the VC's came to us, we never sought them out. So we were able to accelerate our strategy by taking the VC money and we got excellent terms since we already had a profitable business. And we took money from Benchmark that was less then other VC's were offering us because Benchmark's contacts and knowledge has been a huge strategic advantage for us. We have been able to grow our 3 person startup to over 80 employees worldwide, and through our VC's contacts were able to secure a series B from Amazon, NEA and Benchmark. We would never have been able to accelerate our growth and ideas as fast as we have if we never took money. By taking money we have cemented our place in the Ruby landscape as the 800 pound gorilla ;) So yes maybe it is the safe play to not take money and try to sell a product that people want and thats great! But sometimes it really is worth taking big risks with big money working toward big goals. This is not an either or scenario and both ways of doing things are equally viable

comatose_kid 18y ago
120K seed money is still quite a lot - I wonder if this is typical for a F&F round. How did you determine what your funding goal was? ps - thanks for the post - 'from the trenches' insights like these are really valuable. pps - members of your founding team also created the BASIC Stamp? Neat!
- deleted 18y ago
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- ezmobius 18y ago
  Well we were starting a new clustered, virtualized hosting environment so we had hard cash needs to get our first set of servers and equipment and data center space. So it's a little different then starting a software company without the same hard costs. We basically built something like ec2 but with more advanced features like load balancing and clustered, posix compliant filesystems. And we shipped before ec2 came out or was even known about publicly. This kind of system costs $$ to do right so the 120k went mostly to hardware and data center costs to bootstrap us to the point where we could take customers. We started planning in february of 2006 and shipped in september 2006 and it's been a wild ride since then. ps - sure, no problem. Let me know if anyone has any other questions. pps - yeah one of our founders started Parallax who made the BASIC stamp.
  - richcollins 18y ago
    How did the founders pay their personal bills before the company was profitable?
    - ezmobius 18y ago
      We leached off of quality humans inc, which was a rails consulting shop some of our founders ran and also used savings and personal credit to get through the first 6 months or so after we all quit our day jobs ;) But lots of the planning stages, from Feb06 to August06 happened while I still had a full time day job somewhere else.
- jon_dahl 18y ago
  $120K is a lot for a YC-style startup (ramen noodles, web app, and no non-founder employees), but isn't isn't unusual in the larger world. Our seed funding was similar to that, and was basically a F&F round. And for a hosting company, I'm impressed that Engineyard was able to get going and get profitable on $120K.
  - comatose_kid 18y ago
    I could have probably worded that better - I just meant it was a lot of money to raise from friends and family.
RobertL 18y ago
You are right on here ezmobius. Issue isn't whether your are funded or not. Issue is building something that people want.

comatose_kid 18y ago

120K seed money is still quite a lot - I wonder if this is typical for a F&F round. How did you determine what your funding goal was? ps - thanks for the post - 'from the trenches' insights like these are really valuable. pps - members of your founding team also created the BASIC Stamp? Neat!

deleted 18y ago
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ezmobius 18y ago
Well we were starting a new clustered, virtualized hosting environment so we had hard cash needs to get our first set of servers and equipment and data center space. So it's a little different then starting a software company without the same hard costs. We basically built something like ec2 but with more advanced features like load balancing and clustered, posix compliant filesystems. And we shipped before ec2 came out or was even known about publicly. This kind of system costs $$ to do right so the 120k went mostly to hardware and data center costs to bootstrap us to the point where we could take customers. We started planning in february of 2006 and shipped in september 2006 and it's been a wild ride since then. ps - sure, no problem. Let me know if anyone has any other questions. pps - yeah one of our founders started Parallax who made the BASIC stamp.
- richcollins 18y ago
  How did the founders pay their personal bills before the company was profitable?
  - ezmobius 18y ago
    We leached off of quality humans inc, which was a rails consulting shop some of our founders ran and also used savings and personal credit to get through the first 6 months or so after we all quit our day jobs ;) But lots of the planning stages, from Feb06 to August06 happened while I still had a full time day job somewhere else.
jon_dahl 18y ago
$120K is a lot for a YC-style startup (ramen noodles, web app, and no non-founder employees), but isn't isn't unusual in the larger world. Our seed funding was similar to that, and was basically a F&F round. And for a hosting company, I'm impressed that Engineyard was able to get going and get profitable on $120K.
- comatose_kid 18y ago
  I could have probably worded that better - I just meant it was a lot of money to raise from friends and family.

RobertL 18y ago

You are right on here ezmobius. Issue isn't whether your are funded or not. Issue is building something that people want.