Startup

Hi Pud,

I recently created a business plan for an Internet company with some college roommates. I received a rough quote from a web development firm that the website will cost roughly $500,000.

As someone who doesn’t just have $500K just lying around, how should I acquire this type of capital? I know a little about venture capital and angel investors, but I’m not really sure where to begin.

Help!

Best Regards,
Elliot
20 years old
Boston, MA

Elliot,

There’s one obvious problem here.

You said that you “and some college roommates” came up with the plan. Do any of you know how to program? If not, you need to find a business partner who does. In fact, you can probably drop your other partners.

And since your new business partner (the programmer, who you may or may not already know, but you need him) will be doing most of the work initially, it may be fair to give him more equity.

Build the site. Then get traffic & a little momentum, show growth, and make a little $. THEN come back and ask me how to raise money — you’ll be in a much better position.

Rock on and good luck!

Pud

7 Responses to “Startup”


  1. 1 Ten April 3, 2007 at 11:45 am

    I had this issue too for a bit Elliot. Don’t feel too bad.

    I had an idea that I thought was a good one. Lots of people told me it was gonna cost a ton of money.

    Eventually I found I guy who got the idea and was a programmer and was willing to do the work at a discount (note I still had to pay him) for a share of the company. I actually found him via a google ad but people like him can be found all over, from rent-a-coder to craigslist.

    Now, I’ve got a site up and running and proof that I can build something of worth. And the whole thing cost me under $10,000. Of course, that was my own personal money. Which I’m totally not guaranteed to get back.

    But it certainly can be done. Also, please put your youth to work for you. As a 32 year-old with a full time job & a family, it’s so hard to find the time to focus on my web endeavors. Combine your free time with a little bit of savings and you’ll be good to go.

    Good luck!

  2. 2 Anonymous April 3, 2007 at 1:50 pm

    While I do code, occasionally I come up with ideas for sites that I don’t have the time/resources to build. I’ve made deals with various other programmer friends where I get 10% if they actually build the idea. If the idea is that good that someone would actually want to do it, you’ll get 10%. Done across half-a-dozen sites, it’s work out very well for me.

  3. 3 Anonymous April 3, 2007 at 5:17 pm

    does pud know how to program? do you need to be dropped too?

  4. 4 Anonymous April 15, 2007 at 9:50 pm

    From a programmer prospective though, you have to realize that good programmer can be kind of jaded to the approach. Think of it this way – somebody comes to you out of the blue and says, “Hey I have this great idea! Why don’t you work for one month ( six months, one year, etc. ) for me for no or little money and I’ll give you a percentage of my great idea.”

    First off, it better be a damn good idea, and secondly you should be willing to lay out some cash along the way in addition to the percentage you offer. Lastly, your plan should have the nitty gritty details of what you want, not some broad overview like I want a ‘cafe press’ for tatoos or something (actually not a bad idea! :-]). Programmers like specifics.

    Folks that come to me with their ideas and similar proposals are always surprised that I do not jump at the chance and many seem reluctant to part with their cash, or unwilling to explore the specifics. It boils down to this – If YOU are not willing to invest in YOUR project, you cannot expect somebody else to.

    Pud’s right, dump the roommate ‘partners’ – you won’t regret it, especially if you are doing the leg work.

    Good luck!

  5. 5 Mike DeWolfe May 6, 2007 at 11:56 pm

    I have been approached by dozens of people who have said something to the effect of “I have a great idea. You program it and I’ll give X% of the company.” I have almost always turned them down. With many other programmers available (including some hungry ones), I have never ever found that something I’ve turned down has taken off.
    Programming on a website idea is like a the metal in a car: sure you have a lot without it, but you can’t make a go of it.

  6. 6 Anonymous May 31, 2007 at 6:34 am

    I heard Racketeering is good way to make a bunch of capital!

  7. 7 Joseph July 19, 2007 at 8:34 am

    Hi Elliot,

    500K is a huge sum. Web development firms tend to overcharge. Ideally as people before me said, you should get your own programming team on board.

    There are loads of open source technologies out there, that cost nothing and are very reliable just like their non open source counterparts.

    I am a programmer myself, and have come across this post incidentally. If you have any questions to ask me please feel free to drop me an email on joe0192002@yahoo.com

    Kind regards
    Joseph


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