Even though we didn't "technically" know ourselves to be in a recession, I knew something bizarre was going on that summer. I had some really surprising rejections. I never find rejection to be shocking, because even if you're really good, you might not be a fit... but I got turned down for in-person interviews at companies that would have been slam-dunks (for in-person interview) in mid-2007.
Anyway, I found my way to a really cool startup and began working there, the only downside being that pay would be deferred until we had funding. I was told that we'd probably have funding by November. I figured January - March was more likely, since PG's essays have educated me on the fact that funding matters are always a lot worse than expected, but I had enough savings from the hedge fund days to hold out that far.
It's January. I enjoy the work a lot more than I have at prior companies. The problem is that I have no control over the funding situation, and it's started to scare the shit out of me the minute we crossed into 2009. I only have 5-7 months of living expenses now (fuck New York's ridiculous housing costs). I honestly have no idea what I'll do if this doesn't pan out. I don't want to go back to Wall Street and might not be able to (there may not be a Wall Street). With an imploded economy, even a traditional job search is going to be risky and time-consuming. I don't have any contacts that could lead into consulting projects, and taking a typical software job (Java to implement some business guy's lame vision) is about as palatable as selling out and getting an MBA. I want to stay in technology, but working on cool projects and using decent languages (e.g. Lisp, ML, Haskell... or Python/Ruby at the very least).
If the startup gets funding, and it probably will, I'm fine. However, I'm worried about that 1-in-20 (?) chance that we don't manage to line up funding in time, in which I need to do a crash job search in an imploded economy and on shaky ground (and I don't want to do any job search, because I really like the startup and the projects I am working on). It's getting to the point where I hate spending money and I'm delaying necessary expenditures.
So, I'm staring down a 1-in-10 or 1-in-20 risk of utter disaster and now that it's 2009 I'm starting to get scared. Has anyone here been through disaster before? How did it pan out?
Start working on your contacts...you have 7 months to build connections...so that if shit hits the fan, you have somewhere to go fast.
By the way, aren't programmers in hedge funds supposed to make $200k-$500k a year after bonuses and before taxes?
Is that a typo? $60/mo eating fruits and veggies? I live in SF and I have a hard time imagining doing that here, let along NYC...
No kidding. With my first startup I was living on hot dogs and hadn't left the house for months. I had literally reduced my expenses to mortgage, utilities, food. I stretched 3 months of living expenses into a year, although I ended up not needing it as we got funded after 6 months.
My one splurge was a good suit the first time we went on a fund raising interview.
List down your expenses today, sit down and cut out everything that is not necessary. Scale down everything that can. And it doesn't matter if you don't sit in the Starbucks cafe or if your friends find you odd when you don't buy a fancy meal when you go out.
For rent see if you can pack it in a home office, or on a sharing basis.
Get all of these done in a month, if it gets dragged the feeling as i mentioned before gets too bad and pulls your spirit down as you would keep thinking of every penny.
Once you are lean, just put a expense plan and a plan for the company for the expected run way. Go crazy on execution. Good luck!
You should be worried -- and if I were you I'd re-evaluate your odds. My guess is that a startup which would print money would still have more than a 1-in-20 chance of failing to get funding at the moment.
Assuming you definitely want to continue with this startup (and think about that carefully -- sometimes there's a reason why startups don't get funded), I recommend doing everything you can to lower your costs. Yes, including moving out of NYC: While gravitycop makes a good point about location being important for getting funding, it sounds like you're not the person who is going after the funding right now (based on the comment about having 'no control')... and while VCs care where a company is based, they aren't going to care much if a few employees live in the suburbs.
Getting funding has gotten pretty tough here in the Valley. I can only imagine that the funding scene is going to be a lot worse in New York.
You still might have trouble with that right now, it's really not a good time for any kind of loans, and you can forget these multi-million dollar speculative paydays with little obligation or timeline, but if you have a proper business then you have proper business options and hopefully don't have to sell your businesses' soul to get the cash you need to grow.
I moved to Seattle two years ago and knew virtually nobody. I met a lot of people through local groups like SaturdayHouse, Six Hour Startup, and nPost, got to know people, and even found a job through a friend of a friend.
It can be difficult and take time to find the kind of employment that pays and allows you the freedom to do what you love, but it is possible. I wish you much luck.
Nate Westheimer (http://innonate.com/) is the new organizer of the NY tech meetup. He has started an experiment doing office hours to have short (15 minute) meetings with people. http://innonate.com/2008/12/15/office-hours/ Sign up and go talk to him, I can almost guarantee he knows a handful of people who are looking for part time programming help.
Right now the tourist industry there is under a lot of pressure. It would be quite easy to live there very frugally.
Thailand is quite cheap, very friendly and a good atmosphere. It also has surprisingly good access to wifi (not fast, but quite prevalent).
p.s. I was thinking Thailand is a good place to work - holiday is good too.
1 - Get out of NYC fast!! Find the cheapest place you find comfortable and your 5-7 months savings will get you 12+ months. This does not need to be in the U.S.
2 - So you like coding? Ok, but what if for the next 5 years the world won't pay too well for coding? Are you prepared to get into other things?
3 - Don't Panic! Seriously. This is life, stuff happens. Find other things that allow you to be happy. Be positive and start living CHEAP!!!
How is he supposed to get funding, if he does that?
http://paulgraham.com/startupmistakes.html
2. Bad Location
Startups prosper in some places and not others. [...] It's an interesting question why cities become startup hubs, but the reason startups prosper in them is probably the same as it is for any industry: that's where the experts are. Standards are higher; people are more sympathetic to what you're doing; the kind of people you want to hire want to live there; supporting industries are there; the people you run into in chance meetings are in the same business.
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http://paulgraham.com/startuphubs.html
In addition to the concentration that comes from specialization, startup hubs are also markets. And markets are usually centralized. Even now, when traders could be anywhere, they cluster in a few cities. It's hard to say exactly what it is about face to face contact that makes deals happen, but whatever it is, it hasn't yet been duplicated by technology.
How is he supposed to get funding? I am guessing he won't get funding no matter where he is located. Yes, that's a wild guess since I know nothing about his startup. But its the best guess I have.
I do agree with PG's "location matters" advice. But it is also advice based on history. The world is changing and the historical value of certain locations might change with it.
Whatever that is - do it now, not in 5-7 months.
For example: say you'd stop paying rent, and get evicted, where would you go? Whereever that is - go there now. What else would you stop paying for? Phone? Cable? Pretend you have no money, and act that way.
As a side suggestion to where to live, see if you can live in the startups building (do they have an office they can give you?), and put your stuff in storage.
a) Leave everything and bet on getting funds
b) Ditch funds and bet on execution to start breaking even on operations.
I don't really know of "less obvious ways" - what I do seems to me fairly obvious.
1) Rent - I pay $620 a month for a room in Brooklyn that fits my needs in a large apartment where a lot of other people live that's 20 minutes away on the subway from Manhattan (where I would assume the OP works). That's fairly low by anyone's standards, and I intend to keep it that way. I know that if I were to move further out (or, let's say, move out of NYC) I would be able to get a larger place for that kind of money - but the point is that I don't need a larger place, so the "per-square-foot ratio" doesn't bother me at all. I have my own room. Ambient noise coming from the living room or from someone else's room is sometimes an issue (I live with musicians). Earplugs or headphones solve that.
The utilities are split between everyone in the house, the addition is fairly negligible.
1a) This is a somewhat unhelpful generalization, but it has been my experience that someone who was working for a hedge fund in New York is usually not the type of guy that will easily get along with a bunch of pot-smoking musicians that live in a recently gentrified but still somewhat ghetto neighborhood in Brooklyn. However, the OP left and became an entrepreneur, so his soul may still be intact.
2) Food - there was a post sometime ago on how do startups minimize on food expenses. I believe PG's quote was "Rice and beans. There's about 1000 variations".
3) Dating - don't go to expensive restaurants where you are going to lose $150 in one night. A coffee in a local coffee-shop and a walk in the park or on the riverfront - $10, and you are going to have a better time anyway.
4) Sell all your old computer equipment. That old IBM X31 sitting on your bottom shelf that you replaced with the MacBook Pro? You can get around $300 for it on craigslist or ebay.
5) This is an anti-saving tip, but will work in your favor in the end - don't compromise on health insurance.
6) Clothing - I have maybe 2 or 3 outfits that are "date" or "interview" worthy. The rest are crappy t-shirts that I have from college.
There's no silver bullet, to paraphrase Brooks. It's like optimizing your software: you look at what your most expensive expenditures are (profiling) and you try to minimize each one of them in order.
Just check the typical sites, I had good experiences with jobserve.co.uk (they don't only cover the UK - but I am in Europe/Germany).
iPhone contracting seems to be quite popular atm, too. If you already have a Mac, might be worth looking into. Personally I still shun the investment of getting a Mac+iPod touch.
I totally feel with you, but seriously, Java is not so bad that I would rather starve or freeze to death than code in Java.
You left your job in April, that's May through to January where you've had no salary. 8 months. You're looking at 'another 5-7 months' before funding in a recession. In effect, what you're saying is that you're looking at 12 months of unpaid work and wiping out your savings in the middle of an economic downturn in the hope that you'll find a business investor who has the cash to fund your deferred salaries, anyone elses deferred salaries (and if you're the only one then you need to change that) as well as investment moving forward.
In any economic climate what you're suggesting doesn't make sense to an investor, you need to either write that entire year's salary off or drastically change what you're doing. An investor is not there to fund salaries, especially backdated ones. If you want to move forward, you need to find a revenue stream. If you can't find a revenue stream but want to stay involved then you need to find a job and cut your involvement back.
The suggestion about Thailand makes a lot more sense than it first seems. Moving to somewhere that costs a lot less to live with your current 5-7months of new york money will give you a hefty safety net, you could take interesting projects on as and when and could possibly retain some involvement in the startup working from somewhere like Thailand, Morocco, Mexico or even the mid-west.
I hope it works out for you, if you are determined to keep at this project full time unpaid then you need to move out of NYC sooner rather than later. I would advise that you reconsider your level of involvement as this is not a profitable or revenue generating opportunity, which is what you need right now and over the coming year.
It seemed kind of bizarre, but it did make my money last a lot longer, even with the travel cost of getting there and back.
However, I had a friend to move in with so I wouldn't get lonely in an environment where I didn't know the language or culture. Without this, it probably would have been impossible. (I would likely have gotten depressed and unable to get any work done.)
Letting them defer your pay actually encourages them to wait as long as possible before raising a new round of funding, because the money you're lending them is far cheaper (financially) than the money they would get from an investor. Meanwhile, the longer employees work, ringing up deferred comp, the more desperate they get to have the company succeed in raising its next round.
It's a really, really bad combination.
I think the rule has to be, if you're an employee, you should expect to get paid like an employee (i.e. now.) If you are taking risk like a founder, you should get equitized like one, not simply "repaid" your deferred comp. Put another way: you're basically investing that deferred comp in the business, but you're not getting paid for taking that very large risk with your money.
The investors may balk at applying their funds to deferred compensation, asking the founders to re-spin the employment agreement to convert the deferred compensation to common (or options) prior to the investment, further diluting and deferring it.
Why would the founders do that? They would be faced with a choice of no funding or new funding applied to salaries going forward.
This is the problem! You need to do some networking; and I don't mean in some sleazy marketroid way.
Go to barcamps, meetups, language groups, hacker groups, photo meetups, or whatever floats your boat. Get people's twitter names and keep up conversations with them. Go to the bar with them occasionally. Make friends.
If you do this for 5-7 months I guarantee you'll have plenty of connections by the time you need to get a job, and you won't have to spend any of your work time doing it.
Actually, it doesn't even take 5-7 months. Just start e-mailing people working on stuff you like. Go to a bar camp and be above average socially, get a speaking gig there if possible. You'll be good to go.
Your deeper problem is the expectation that someone else will invest in a company with a large team, obligations to cover back pay, several months of development behind it, and no road map to profitability. If your company is pinning its hopes on a long shot instead of figuring out how to get a revenue stream, that is your problem right there. How it gets solved depends on the company. The standard way is called bankruptcy.
That's following your intuition, not his. I agree with yours, though.
Let's take a worst case scenario. The company fails, you lose your apartment and car and are unemployed with no money. What then?
Well, you have a million choices. You are young, smart and live in America. You wake up the next morning at your parents house and go get a job at Home Depot or 7-11 to make ends meet (or back to wall street if you can stomach it), you start saving and planning your next venture and work your way from there. You've gained valuable experience and you are living your dream, something that most people never do.
In the mean time, enjoy yourself. Feel the fear, which you will, and forge ahead. In your spare time keep working on improving your skills. Listen to CDs by Anthony Robbins for encouragement and strength. It sounds like you are doing great and remember, the bigger the risk, the bigger the reward. Don't fear failure, that's just part of the ride.
The reason I ask is that I assume from your experience with the Hedge Fund, that you probably have more financial expertise and contacts than the founders. Maybe they even cut you in for more.
Also, stop feeling scared and terrified (your words). These emotions are not helping you in any way.
Rule 2. See rule 1.
I strongly recommend spending part of your time (one or two days a week) looking for a job to hedge your bets.
The standard answer, to consult, is probably the right one, and you are being wildly pessimistic about your chances of finding a sustaining consulting project. But once you start down that road, your current startup will suffer for it.
I think starting to put feelers out for consulting work is probably the best strategy. Even though we've got a bit more runway, some customers and some VCs that have approached us, I've been trying to do the same for the what if case.
The upshot is if you can organize enough cash to keep yourself running through the downturn and do just enough consulting to stay afloat and start growing a revenue stream, if your company is still alive on the other side of this downturn it'll have cleared out a lot of the market and it'll put you in a pretty good position to try to raise a round if things are rosier in a year or so or if you can keep costs low to make a transition to living off of the revenue.
That's been the focus of the planning that I've been doing for us at the moment: "How do we make sure that we're alive in a year, and how much revenue will we need at that point to be self-sustaining."
Email other startups and ask if they're hiring, tell them about your situation and if you can pull your weight and do what's required I'm sure you'll have a job in no time.
Can't think of any startups off the top of your head? Use startupwarrior.com and map some that are close to you and start calling/emailing.
You can survive on Lentils and rice, toss in a little Quinoa and a lime and you could go a few years on pennies. Of course, what you are outlining is that you have a life to attend to.
Well, then get a job that pays or demand pay from your current job.
