Help with next steps for a startup

September 4, 2016 6:33 AM

I started a company that designs language learning apps. Initial funding was through Kickstarter. That Kickstarter did very well, and the last 2 years have been spent developing 65 products, which have continued to sell well after the Kickstarter, so the company is now self sustaining. I have another ~half year of Kickstarter-related work to do, but after that, I'd like to develop a new, very complex, very high quality language learning app that's going to take a lot of money to get off the ground. I have lots of expertise in language learning and basically zero expertise in startups, market research, business, fundraising, app pricing, etc. These next steps are potentially going to move my little niche business into mainstream territory, and they're very large steps that require way more business expertise than I have. So...what do I do? I feel like I need to hire someone/an agency to tell me what to do next, but I don't know the job titles of these people, or how to find people who are so good and reliable that I can reasonably put my entire financial future in their hands. What do?

The biggest questions I'm trying to get answers for:
- How should I finance this app? I can self finance and/or Kickstart again (which means I still own the whole product), or I can do VC (which means I don't), or ??? Not sure how to make that choice.
- How should I price this app? Depending upon what we include in this thing, it may potentially make make my old, still-lucrative, company-sustaining apps obsolete.
- This is my family's entire source of income, and it's steady and adequate and I'd honestly be happy if nothing changed in that respect at all. But...I want this app to exist, because I think it's important. How on earth do I know whether to trust someone's recommendations about how to proceed when this is such a large set of decisions and so much is at stake? Is this sort of market research reliable enough to bet your whole livelihood on? Or is it more like weather forecasting? :P

posted by sirion to Work & Money (11 answers total)

That is a great problem, congrats! There a so many resources, do you read hacker news? There's some thoughtful commentary on the "founder dating email list" The VC's seem to want huge potential, and if you're left with a tiny slice of insanely huge it can be pretty great but do meditate if you're ready to shift into the fast lane. If you go that way have a very very smart and highly topically experienced contract attorney that you trust on tap.
posted by sammyo at 7:09 AM on September 4, 2016

Response by poster: @sammyo: Registered for the founder dating email list thing. I guess one of the issues is that I'm sitting on something that appears to be very large, and I can feasibly finance the whole thing myself, and don't necessarily *need* VC, which seems to be a relatively odd position to be in. I'm hoping that I can hire someone who can semi-reliably tell me what my options are (i.e., you can go VC, and THIS will happen, or you can go private, and THIS can happen, or you can get a loan and THIS will happen, or you can fund out of savings, and THIS happens...)
posted by sirion at 8:02 AM on September 4, 2016

Re: the "how do I fund?" part of your question

Based on the information you provided, I'm going to suggest it is too soon for VC funding. VCs - because of the way funds are structured - are necessarily going to have to make bigger bets just to keep their total number of investments manageable (think units of $1M), and will be looking for a commensurately large payoff. They are also looking for a high internal rate of return - maybe making all of their initial investments over a five year period, then sustaining and harvesting for five years, with the idea that a fund will run for ten years. In other words, they are relatively in a hurry to see results.

To make an investment, VCs are going to be looking for some combination of a track record (of taking a VC backed company to successful exit), an existing product you can demo, maybe some early customers, and a concrete business plan for how you are going to take that product to market and grow the business. I expect the reaction you'll get at this point is, "we'd love to talk to you in a year when you have something to show us." When you are just getting started, funding mostly comes from some combination of self-funding, raising money via "friends and family", and angel investors.

If you want to jump in with both feet and just get a crash course in how startups and entrepeneurship works, I would recommend subscribing to Mattermark Daily and just start reading everything they publish/link. This is a curated list of blog entries from people in the startup world, both investors and operators, so many of the articles assume a working knowledge.
posted by kovacs at 9:03 AM on September 4, 2016 [1 favorite]

It might be worth investing in something like Pragmatic Marketing. Despite the "marketing" in the name, a lot of it is really about product management, which is a huge part of what it sounds like you need help with. They focus a lot on really important things like making sure you really understand what your customers need, understanding the competitive landscape, and so on. It's pretty high level, and some of it is probably geared to larger/more complex companies, but it's a good overview of what it takes to define a product and get it to market.
posted by primethyme at 9:47 AM on September 4, 2016 [1 favorite]

Have you thought about applying to Y Combinator? The reason I ask is that "I have lots of expertise in language learning and basically zero expertise in startups, market research, business, fundraising, app pricing, etc" is pretty much YC's sweet spot: they know that it's much easier teaching those things to engineers and makers than it is to teach engineering to business people (I'm assuming you have product and engineering skills based on your description of your progress so far).

I went through YC a few years ago from a similar starting point (engineering and product experience but no business skills) and found it to be an excellent decision.
posted by simonw at 9:54 AM on September 4, 2016

Yes, you should be looking for accelerators such as YC. They'll give you the resources to decide where and how to take your company. Sounds like you're in a great spot, so I think you won't have much trouble finding people eager to help.
posted by so fucking future at 1:36 PM on September 4, 2016

Also worth mentioning: YC accept less than a hundred out of many thousands of applications, but your description of your progress so far should be enough to help your application stand out. It's very competitive but I think you would be in with a better chance than many.
posted by simonw at 1:53 PM on September 4, 2016

You should really definitely read the Lean Startup by Eric Ries. It is practical, informative and generally excellent. I cannot recommend this enough. It answers the specific questions you have and it will point you in the right direction.
posted by iamkimiam at 3:10 PM on September 4, 2016

Even if you do not want to apply to YC, fill out the application. It's an interesting exercise in its own right.YC also has online resources.
posted by Michele in California at 10:07 PM on September 4, 2016

I've never been a founder but I can tell you something you do NOT want to do. You don't want to hire someone that you think is smart and trustworthy and give them the keys to the non-technical side of the business. Maybe 3-4 people with differerent responsibilities. But no matter how experienced or brilliant, one person in charge of business descisions who is NOT a founder is major red flag danger zone.
posted by Potomac Avenue at 1:44 AM on September 5, 2016 [1 favorite]

Why not have your current company build this product?
posted by J. Wilson at 7:47 PM on September 5, 2016