Comments on: Friday Q&A: Should Early-Stage Startups Raise Money to Hire Developers?

By: halogenn

halogenn — Tue, 03 May 2016 15:21:08 +0000

Hey Alex, yet another great post! I look forward to your Q&A every week to pick up on lessons along the way. I do have a question though that I, as a support find it a challenge to deal with.

“How do you deal with customers asking for a refund of your service?”
We’re a SaaS company and we get this kind of emails from time to time. They reason that they don’t know it’s a monthly subscription, they got charged this month and they want it to be refunded, they don’t use the app anymore, and the occasional “you charged me without my authorization” where clearly it was a monthly subscription from the start.

How do you tell them in a nice way that you don’t do refunds if they didn’t use the app/cancelled on time?

P.S. Please don’t mind the username. It adds a touch of anonymity.

By: Brett Herkt

Brett Herkt — Sun, 01 May 2016 21:03:42 +0000

There are a couple of questions to consider in making this decision:

1. Have you done enough validation to reasonably believe you have product market fit?Until you’ve crossed that hurdle, any expenditure on development is highly risky. Given that most startups fail because they build something nobody wants.

2. Have you got the financial runway to take your time? Alex’s advice of taking your time to really understand market, customers, product etc is great. And in fact the ideal scenario but in many cases the founder(s) can only sustain themselves so long without investment. In which case, having revenue (and ideally at least a few happy customers) is critical. Leading ultimately to taking a balanced view of the risks of going too fast or too slow – and likely hiring developers relatively quickly after validating product market fit.

By: Siddharth Shekhawat

Siddharth Shekhawat — Fri, 29 Apr 2016 20:01:46 +0000

Raising funds early on is like a double edged sword. It might work for someone but not for others. But I agree to your point that it is always better to have some traction and customer base before reaching out to Investors, so that you are in a better position while fund raising. We are following this strategy at our startup. Our main focus right now is to get some solid traction and loyal customers.

By: Julie Delisle

Julie Delisle — Fri, 29 Apr 2016 18:51:10 +0000

This is such a good question and I couldn’t agree more with this answer. At Beeye, we did the exact same thing: we didn’t raise money in the beginning and build slowly but surely our software, spending time talking to customers and improving the product-market fit. Furthermore, as they say, 9 women can’t make a baby in one month, and more developers may not speed the process as much as we would like. We prefer to build slowly a strong team with less players, but all-stars. 🙂

By: Heather Holst-Knudsen

Heather Holst-Knudsen — Fri, 29 Apr 2016 16:21:11 +0000

We are going through this very same issue. My personal position as the sole founder of my startup and having received 300k in cash coupled with my own larger investment is to try to do as much as we can to build our product and get it out the door without seeking much more capital. I tie that to also finding a quick path to revenue versus rapidly scaling for growth (ie tons of users but no $$). It’s definitely slower and nail biting at times, but long term, everything you said about pivoting, investor expectations, and equity dilution is all very true and real. There’s also a tentative dark cloud looming on the VC front according to some investors so if you are in a high burn rate position and in need of large cash infusion, you put yourself at incredible risk.

By: Nimble Journey

Nimble Journey — Fri, 29 Apr 2016 15:46:23 +0000

I noticed a comment on a much earlier post of yours that stated that you had something like 250k of startup money and then something like 1m in contributions within the first year or two. This seemed to suggest that you did indeed have some backing that startups might ordinarily not have. I wonder how you might address the issue of very early starups acquiring this kind of backing, regardless of the amounts and exact sources terminology. Thanks.

By: Ryan Angilly

Ryan Angilly — Fri, 29 Apr 2016 15:39:15 +0000

I read the subject of the email to this post and all I thought was: http://giphy.com/gifs/no-kanye-west-12h4pgk1SRtLuo

😉

I hate Tweet-sized advice, but I saw a great one recently that’s relevant:
“Raise money to fuel the rocket, not to build the rocket.”

By: CauseSquare

CauseSquare — Fri, 29 Apr 2016 15:36:40 +0000

Best advice ever.