_Carleen notes: This story originated as a comment to “our Found|READ post”:http://www.foundread.com/view/zero-cash-plan yesterday based on Wil Schroter’s essay “Five Ways to Move your Startup Forward without Cash”:http://www.gobignetwork.com/wil/2007/7/10/five-ways-to-move-your-startup-forward-without-cash/10175/view.aspx. Read the full list of comments as all are insightful–and inspiring. Adam’s comment on “Zero-Cash Plan” begins here:_
Commentor “Daniel Gibbons”:http://www.foundread.com/person/4036-bluelines is right: From my own experience at *Octabox*, when I first came up with the idea and talked to my partner, we decided not to go after any potential investors, since the only thing we had was an idea. And:
– *We had next to no experience* in developing a startup. (or some but not enough.)
– We had *no working product* to confirm we have a market and a clear proposition.
– We *didn’t have the right team yet* since we were just fresh.
We came to these *5 Conclusions* (Some may not apply to your business, but they were for ours):
– *No Business Plan*: Don’t start by writing a business plan, a short executive summary and a presentation is what people will look at or read. If you can write clearly about your idea in 2-3 sentences then you are good to go, business plan should be a mashup of documents you wrote to explain different side of your company. Personally I don’t think anyone will ever read your business plan, maybe when VCs do their Due Diligence (?).
– *Registration*: We went to register our company and went to a lawyer from day one, they usually charge less when you’re just 2 guys in a garage developing a prototype.
– *Start from Day one*: And we don’t mean start prototyping your product because this should be *CLEAR* that developing your product is a must. But when we registered our company, we defined *Octabox* as a separate entity than *Lionite* (Our design firm), since we started to take gigs in consulting and designing medium and large scale web application. It helps you tremendously, as it give you a big influx of money and let you start hiring people from day one, it gives you experience and let you to know how your team works and execute. _Some may say that it could take the focus out of your product but your main job or anything else that let you bring money to your table in order to develop your product will take that time anyway, so what do you prefer? Developing and consulting when both will bring you some experience/feedbacks so needed or Waste your time?_
– *Bootstrap your life*: your startup is at this stage that everything that happen in your life will be reflected in your startup, if you live an expensive life and can’t afford to put some money and time in your startup instead, my best advice for you would be to check if this is right for you. Usually when you have a good idea and want to develop it, you have this _scratch_ to leave everything, cut down your expenses and put all the budget and time available on this idea. That’s right: it’s your baby.
– *Hire people* – i would say do more than sit on a cup of coffee with your developers. Hire them for ridiculous amount of money, when we first looked at a developer at the market price, we found out that they would be a lot of people willing to work for us for high salary. They were off the budget and I don’t think they really understand what we were looking for, I told my partner that *sometimes it’s better to hire someone with 0 experience and little knowledge and that the true things that matters are: trust, ability to learn, ethics.* This will not only let *you learn to how to handle human resources* before getting investments but also let you grow the people you need and want. *People will less experience and knowledge sometime tends to be more loyal to your business and enthusiastic.*
*An anecdote:* Yesterday we sat down with a developer we’ve been employing as a freelancer. We proposed to him a monthly salary (still low) in return for more of his time and dedication. Our freelancer was a little bit surprised since he said he has little experience and knowledge (the fact is my partner is really happy with his work and says that he’ll catch up to the level we need once we get funding), so *he wanted to know: ‘how come you’re hiring me and giving me more responsibilities?’ I replied that ‘this is my first time as CEO of my startup and my first timel trying to raise funding!’ Will it stop me being successful? Hell no!, I have this feeling deep inside that I’m doing the right thing.* Every employee should get his chance, and if you have no money, then it would be better to hire someone who costs you next to nothing for 6 to 12 months than hire someone expensive for 1 to 2 months. Think about the learning curve.
3 thoughts on “A Zero-Cash Case Study”
Adam, i can not yet begin to thank you for this post. i am a few months away from wrapping up my college degree in business and not once have i ever been told what i needed to do to start a company (i know a ton of theory but nothing really practical)…about 2 months ago a few friends and i began developing a website/start-up and we were completely lost as what to do. although with these months we have learned a boatload, i am still schorr that this post will help many people that are in the same position as i was a few days ago. GREAT tips!}
Thanks, Nathan. The most important thing is to remember to give the same help you received to someone else.}
It’s true – hire people!
It’s a sanity saver and allows you to focus on what matters most: sales and execution.
I recently hired my QA manager from an earlier company, an exceptionally diligent person, to work as my production manager. It has literally changed my life.
And when I proposed a rate and she upped it I said “fine”. Because I knew that the true value of every hour of her work was in regaining an hour of my own.}