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What's the number one reason small businesses fail? They run out of money. The "checkbook" is the most important thing. So, yeah, having money or more import

What's the number one reason small businesses fail? They run out of money. The "checkbook" is the most important thing. So, yeah, having money or more importantly being able to access or raise money, is more important than almost anything. I guess this is the difference between being a programmer and being a true entrepreneur. I don't think I'm unable to build anything: social network, car company, health-care service provider, you name it. And I don't, personally, need specialized expertise in any of it. Edit: I think we were both editing, so I removed my inflammatory "mocking" comment.

its_so_on 15y ago
Absolutely not mocking it in any way. I absolutely believe in my first paragraph (I even emphasize my agreement), completely non-ironically. My favorite way I've heard this stated is "Napoleon didn't personally conquer northern Italy." Now, there is something diferent and special that the blog post we're talking about is referring to, and which basically holds ONLY with software. As opposed to car company, health-care service provider, you name it, software is this thing where if you build the lines of code once, you can use them n times at a marginal cost approaching 0. In any other business, if you go from having 10 customers to having 1000, you can't just put another couple hundred into the bank account to cover hosting bills while their monthly payments clear. What this guy is talking about, in my opinion, is the small 2 or 3-person team that, without any money, but only time, Skype, IRC, cheap cloud hosting services (AWS stands out), and standard local and remote software-building tools, can build a complete application without convincing anyone to build it nor paying anyone to build it. Does every team need a technical co-founder? (someone who can use git or ssh?) I personally don't think so. This guy would probably disagree. (But, since the whole blog post is about semantics, I will say this. In my experience, people - especially associated with Y-Combinator, who use the term "technical cofonounder" expect it to mean coder. It's weird. Here's something related. The people who use this term use CTO to refer to someone who is really good at setting up the architecture of the stack, the database, the use cases, and committing actual code to create the application from scratch after selecting the language(s) and frameworks to use. To me, none of this says "CTO", since, to me, CTO says "director-level position overseeing technology", and, to me, anyone with the title of CTO would never commit a single line of code and would only use SSH to check up on other people's work - never anything else. But that's not the usage on y-combinator type startups, and this is what this blog post is talking about.)
- waterlesscloud 15y ago
  "Napoleon didn't personally conquer northern Italy." Said by someone who should read up a bit more on how Napoleon conquered northern Italy. The man was everywhere with his nose in everything. While he didn't literally do every job, he knew how every job was done and was perfectly capable of stepping in when he needed to. There's a case to be made for that in the world of startup leaders as well.
  - its_so_on 15y ago
    You know I liked that quote enough to look it up verbatim for my post, so I would get it right. It's from this comment on Slashdot in August 2010: http://apple.slashdot.org/comments.pl?sid=1764528&cid=33356394 http://apple.slashdot.org/comments.pl?sid=1764528&cid=33... The parent comment to the comment had said this (about Steve Jobs): "Pedantic note. He didn't revolutionalize anything. His company may have. He may have been the final say on the design and implementation decisions, but he didn't do it. The engineers did. The researchers did. The programmers did. Just because he's the one standing on the stage during a keynote doesn't mean that he really did anything (I'm not saying he didn't, but I'm saying that just because he takes credit doesn't mean he deserves to take credit)..." And the full response to this comment (I only quoted half), was: "Leaders are generally given credit for accomplishments. Napoleon didn't personally conquer northern Italy." It's an interesting contrast to your statement, because although Napoleon might have been able to set up artillery and weild a sabor, Steve Jobs was not an engineer. (This is what Bill Gates said recently about him). If you really want to get into it, his deepest credentials, very early in adolescence, in engineering, came from having his buddy working the night shift developing for him, and his claiming the results. He literally could not do what he wanted/needed to, and literally had to have his friend help him. So I don't know about whether Napoleon personally cleaned bores, or knew the intricacies of every job, but it is fair to say that Steve Jobs could not do what he wanted done early on, and for the past few decades certainly couldn't do any of the jobs the engineers were doing. I think you also completely miss the sweet meaning of "personally", which forms a nice mental image. You say he was perfectly capable of stepping in when he needed to. But obviously, he could not have stepped in for the whole army. Just because he had the ability to do any of the jobs (even if that's true), does that mean he could do every one of the jobs all at once. In the YC sense of a startup, frequently the "technical cofounder" or CTO can literally go ahead and "step in" for the whole army! With literally not a single other person having any access to the servers, the "technical cofounder" can keep the operations running and make updates "personally". In this sense, it's pretty preposterous to think of Napoleon "personally" conquering anything.
hospadam 15y ago
The 'checkbook is certainly important to any startup. However, let's look closer. When the money runs out, a non-technical founder can no longer afford to run the startup, and it effectively shuts down. However, even with no money, a technical founder can continue to build the business on their own. I think that's a core difference: even in the worst case (no money, no employees, no traction), technical founders can still work on actually building something.
- tatsuke95 15y ago
  On one hand, you're absolutely correct. On the other, if I were interested in running a one man show, I'd have become a programmer! I suppose it's part of this start up culture that the "money runs out". I also understand that that can happen anywhere. However, part of being a good business guy is making sure that doesn't happen, through careful planning and implementation. Really, that's the business guy's job.
  - its_so_on 15y ago
    I thought of something that you might have missed. This is very particular to YC. Perhaps you didn't realize, but a successful application to Y-Combinator gets an average investment from YC of $18k. ("Twice a year we invest a small amount of money (average $18k) in a large number of startups" http://ycombinator.com/. http://ycombinator.com/.) 18,000 for the whole company. Let's look at it if you don't have a "technical cofounder=coder" who is part of the team getting the 18,000. Now you have to put some of the 18,000 toward coding. Now it is generally acknowledged that the total cost to a company of a worker is about double the stated salary. So, 18k will get you 9k worth of salary. But of course you have all kinds of miscellaneous expenses associated with setting up a company! Like paying for hosting, or a space to work. Maybe you can reduce ALL of your other expenses to 20% of the investment, so that you're left with 80% of the investment (a preposterously large amount) that you can use on a coder. This is 14.4k. This equals a 7.2K of salary (remember, you double stated salary to get actual cost to your company). This is how much coding you get for 7.2k. 0.09 years = 1.44 months at 60k annual salary rate, or 0.15 years = 1.08 months at 80k annaul salary rate, or 0.125 years = 0.9 months at 96k annual salary rate. At forty hours, you are getting: 230 hours at 60k, or 172.8 hours at 80k or 144 hours at 96k. This is two weeks of crunch development time. And this is if you can give 80% of your investment to an outside coder. Does this sound reasonable? Also bear in mind that contractors are more expensive than salaried positions. And, if you have no coder on board, in other words you need a complete architect and CTO, then you are looking at the very highest end of that range. And all this is you spent 80% of your investment on an outside coder. To me, it would seem fair to say that you have more like half of your investment that you can possibly spend up-front on an outside developer, bringing those numbers to... 143.75 hours at 60k, or 108 hours at 80k or 90 hours at 96k. Do you think you can hire a guy to build your next eBay-of-x for you in 90-140 hours to the point where it GENERATES ENOUGH PROFIT FOR YOU TO KEEP PAYING HIM? Absolutely out of the question. This is why, in particular, the Y-C formula requires a technical cofounder as defined in this blog post. It's very particular to YC, because they expect you to get a company off the ground for about as much as a traditional company would spend on office space rent in three or four months. Y-Combinator's formula just doesn't work without a "technical co-founder" working for equity. Entrepreneurship is simply not enough, when all you have is 18k to work with spread among every single cost the company will have, until it's profitable enough to pay for coders: who are very expensive.
devinfoley 15y ago
Often times running out of money is a symptom of a larger problem.
- its_so_on 15y ago
  More often when you run out of six, seven, or eight figures than when you run out of three or low four.

its_so_on 15y ago

Absolutely not mocking it in any way. I absolutely believe in my first paragraph (I even emphasize my agreement), completely non-ironically. My favorite way I've heard this stated is "Napoleon didn't personally conquer northern Italy." Now, there is something diferent and special that the blog post we're talking about is referring to, and which basically holds ONLY with software. As opposed to car company, health-care service provider, you name it, software is this thing where if you build the lines of code once, you can use them n times at a marginal cost approaching 0. In any other business, if you go from having 10 customers to having 1000, you can't just put another couple hundred into the bank account to cover hosting bills while their monthly payments clear. What this guy is talking about, in my opinion, is the small 2 or 3-person team that, without any money, but only time, Skype, IRC, cheap cloud hosting services (AWS stands out), and standard local and remote software-building tools, can build a complete application without convincing anyone to build it nor paying anyone to build it. Does every team need a technical co-founder? (someone who can use git or ssh?) I personally don't think so. This guy would probably disagree. (But, since the whole blog post is about semantics, I will say this. In my experience, people - especially associated with Y-Combinator, who use the term "technical cofonounder" expect it to mean coder. It's weird. Here's something related. The people who use this term use CTO to refer to someone who is really good at setting up the architecture of the stack, the database, the use cases, and committing actual code to create the application from scratch after selecting the language(s) and frameworks to use. To me, none of this says "CTO", since, to me, CTO says "director-level position overseeing technology", and, to me, anyone with the title of CTO would never commit a single line of code and would only use SSH to check up on other people's work - never anything else. But that's not the usage on y-combinator type startups, and this is what this blog post is talking about.)

waterlesscloud 15y ago
"Napoleon didn't personally conquer northern Italy." Said by someone who should read up a bit more on how Napoleon conquered northern Italy. The man was everywhere with his nose in everything. While he didn't literally do every job, he knew how every job was done and was perfectly capable of stepping in when he needed to. There's a case to be made for that in the world of startup leaders as well.
- its_so_on 15y ago
  You know I liked that quote enough to look it up verbatim for my post, so I would get it right. It's from this comment on Slashdot in August 2010: http://apple.slashdot.org/comments.pl?sid=1764528&cid=33356394 http://apple.slashdot.org/comments.pl?sid=1764528&cid=33... The parent comment to the comment had said this (about Steve Jobs): "Pedantic note. He didn't revolutionalize anything. His company may have. He may have been the final say on the design and implementation decisions, but he didn't do it. The engineers did. The researchers did. The programmers did. Just because he's the one standing on the stage during a keynote doesn't mean that he really did anything (I'm not saying he didn't, but I'm saying that just because he takes credit doesn't mean he deserves to take credit)..." And the full response to this comment (I only quoted half), was: "Leaders are generally given credit for accomplishments. Napoleon didn't personally conquer northern Italy." It's an interesting contrast to your statement, because although Napoleon might have been able to set up artillery and weild a sabor, Steve Jobs was not an engineer. (This is what Bill Gates said recently about him). If you really want to get into it, his deepest credentials, very early in adolescence, in engineering, came from having his buddy working the night shift developing for him, and his claiming the results. He literally could not do what he wanted/needed to, and literally had to have his friend help him. So I don't know about whether Napoleon personally cleaned bores, or knew the intricacies of every job, but it is fair to say that Steve Jobs could not do what he wanted done early on, and for the past few decades certainly couldn't do any of the jobs the engineers were doing. I think you also completely miss the sweet meaning of "personally", which forms a nice mental image. You say he was perfectly capable of stepping in when he needed to. But obviously, he could not have stepped in for the whole army. Just because he had the ability to do any of the jobs (even if that's true), does that mean he could do every one of the jobs all at once. In the YC sense of a startup, frequently the "technical cofounder" or CTO can literally go ahead and "step in" for the whole army! With literally not a single other person having any access to the servers, the "technical cofounder" can keep the operations running and make updates "personally". In this sense, it's pretty preposterous to think of Napoleon "personally" conquering anything.

hospadam 15y ago

The 'checkbook is certainly important to any startup. However, let's look closer. When the money runs out, a non-technical founder can no longer afford to run the startup, and it effectively shuts down. However, even with no money, a technical founder can continue to build the business on their own. I think that's a core difference: even in the worst case (no money, no employees, no traction), technical founders can still work on actually building something.

tatsuke95 15y ago
On one hand, you're absolutely correct. On the other, if I were interested in running a one man show, I'd have become a programmer! I suppose it's part of this start up culture that the "money runs out". I also understand that that can happen anywhere. However, part of being a good business guy is making sure that doesn't happen, through careful planning and implementation. Really, that's the business guy's job.
- its_so_on 15y ago
  I thought of something that you might have missed. This is very particular to YC. Perhaps you didn't realize, but a successful application to Y-Combinator gets an average investment from YC of $18k. ("Twice a year we invest a small amount of money (average $18k) in a large number of startups" http://ycombinator.com/. http://ycombinator.com/.) 18,000 for the whole company. Let's look at it if you don't have a "technical cofounder=coder" who is part of the team getting the 18,000. Now you have to put some of the 18,000 toward coding. Now it is generally acknowledged that the total cost to a company of a worker is about double the stated salary. So, 18k will get you 9k worth of salary. But of course you have all kinds of miscellaneous expenses associated with setting up a company! Like paying for hosting, or a space to work. Maybe you can reduce ALL of your other expenses to 20% of the investment, so that you're left with 80% of the investment (a preposterously large amount) that you can use on a coder. This is 14.4k. This equals a 7.2K of salary (remember, you double stated salary to get actual cost to your company). This is how much coding you get for 7.2k. 0.09 years = 1.44 months at 60k annual salary rate, or 0.15 years = 1.08 months at 80k annaul salary rate, or 0.125 years = 0.9 months at 96k annual salary rate. At forty hours, you are getting: 230 hours at 60k, or 172.8 hours at 80k or 144 hours at 96k. This is two weeks of crunch development time. And this is if you can give 80% of your investment to an outside coder. Does this sound reasonable? Also bear in mind that contractors are more expensive than salaried positions. And, if you have no coder on board, in other words you need a complete architect and CTO, then you are looking at the very highest end of that range. And all this is you spent 80% of your investment on an outside coder. To me, it would seem fair to say that you have more like half of your investment that you can possibly spend up-front on an outside developer, bringing those numbers to... 143.75 hours at 60k, or 108 hours at 80k or 90 hours at 96k. Do you think you can hire a guy to build your next eBay-of-x for you in 90-140 hours to the point where it GENERATES ENOUGH PROFIT FOR YOU TO KEEP PAYING HIM? Absolutely out of the question. This is why, in particular, the Y-C formula requires a technical cofounder as defined in this blog post. It's very particular to YC, because they expect you to get a company off the ground for about as much as a traditional company would spend on office space rent in three or four months. Y-Combinator's formula just doesn't work without a "technical co-founder" working for equity. Entrepreneurship is simply not enough, when all you have is 18k to work with spread among every single cost the company will have, until it's profitable enough to pay for coders: who are very expensive.

devinfoley 15y ago

Often times running out of money is a symptom of a larger problem.

its_so_on 15y ago
More often when you run out of six, seven, or eight figures than when you run out of three or low four.