There are good reasons to take $20k from angels and good reasons to take $20k from clients. Both will distract you a bit from building your product and selling it to people - you have to prospect, negotiate, get paid, etc. On the plus side for clients, as soon as the check clears you're even. Two years from now a $20k invoice is a cute memory but a $20k investment still dilutes you, takes a spot on your cap table, and gives someone the right to send you email when you would prefer to be building stuff and selling it.
I am consulting again this week. It will chew a week that I could have done marketing for AR with, but the invoice will make things much easier for me. Partly it will pay for some work to accelerate AR's revenue growth, and partly it will pay for a mini-vacation with my girlfriend to meet my family. (If that suggests mid-term plans not often associated with startups, well, what can I say, I'm quirky.)
Thanks for the comment. I am the OP. It's true that both consulting and angel money will distract you front building the product. One key difference, though, is that getting a $20k invoice paid for work done is much easier than convincing an angel to give you $20k for an idea.
As many have pointed out, though I did consulting work, I never let it "take over" (well, at least not for more than a couple weeks at a time). However, I have seen the angel fundraising process "take over" the life of a startup for a few months, and often with a $0 eventual outcome.
Good thoughtful post. Especially agreed with the OP's point dispelling the notion that that entrepreneurs shouldn't do other things (consulting) as advocated by PG and many other investors. Think the subtext with those comments often is "if you have time to do consulting, you must not be thinking big enough".
While you're building your product, consulting can help you:
(1) Live to fight another day
(2) Learn to sell/negotiate with real customers
(3) Get experience managing people
As someone having done the consulting thing, I've found that it has made me/our team better business people/entrepreneurs. Of course, it can be a tough balance b/w consulting effort and product/startup efforts, but there are always trade-offs/choices to be made.
"Live to fight another day" -- so important. I noticed that the more time went on with Parse.ly, the more important the individual fights became. If we had died prematurely, we would have missed out on the ability to participate in the fights that actually mattered.
I'm still confused by this notion of startup, because reason tells me that if the business is as important as it is, then doing anything in your power to keep the money coming in is a good thing.
Is the definition of a startup going full-time into a project that is not yet profitable? Not many of us have that luxury.
Is it a product? 37 Signals did OK with Basecamp in between consulting gigs.
My solution has been to ignore the syntax and just worry about building my empire, one sale at a time, whether it comes in the form of client revenue or product sales.
I really think it's less about "startup" than it is about having a vision for yourself and the world.
It's much easier to do a startup if you've saved up a war chest :) Or if your operating expenses are so low that you can sustain yourself long enough to see the business flourish.
Ironically, the various funds of Nassim Taleb suffer the same problem: collapsing because they could not survive to the moment when their strategies would be profitable.
I see what he is saying about the consulting helping parse.ly succeed, but I do not see him prioritizing it over the startup. I believe you can do other things & should if you have to, but minimally. Other things often become the thing, because of the decrease in focus on the original thing.
"no one ever gives you money when you need it!"
It's true, most people are bandwagoners in life & even more so when it comes to investing funds. Which of course builds up the "F U" mentality in those vested in a venture toward tardy supporters. But at the end of the day cash is cash...
"Fact: America’s broken healthcare system is harmful to entrepreneurs."
I won't even get started on my health insurance woes...
Actually, I'd like to get you started because I think this is important. I just spent some time on the phone with a technologist who was considering leaving his full-time job to join Dreamit Ventures (Parse.ly's original incubator which just moved from Philly to NYC). The #1 reason he couldn't bring himself to do it so far: the enormous healthcare cost he would have to pay. I couldn't really argue with him. I was paying $1000/mo. in healthcare for the last 12 months (paying for 2 people, me and my girlfriend). That plus the rent for my small 1BR in NYC basically ate 90% of my earnings in my first 4-5 months. If healthcare were free or subsidized, the story would have been very different. I wonder how many potential entrepreneurs decide not to leave their full-time job due to the healthcare reason.
Excellent post, except the "Don't do other things" part of it.
What PG offered in essay was an advice and not an answer/Theory. Advice - "a proposal for an appropriate course of action". It's just a proposal, not an answer to your situation. a better advice(proposal) of ( "Doing other things to not die" ) can be a better advice in some specific cases(like yours) and does not make PG's advice wrong.
Well written post and Thanks again for sharing your thoughts
"""The trouble with consulting is that clients have an awkward habit of calling you on the phone. Most startups operate close to the margin of failure, and the distraction of having to deal with clients could be enough to put you over the edge. Especially if you have competitors who get to work full time on just being a startup.
So you have to be very disciplined if you take the consulting route. You have to work actively to prevent your company growing into a "weed tree," dependent on this source of easy but low-margin money.
Indeed, the biggest danger of consulting may be that it gives you an excuse for failure. In a startup, as in grad school, a lot of what ends up driving you are the expectations of your family and friends. Once you start a startup and tell everyone that's what you're doing, you're now on a path labelled "get rich or bust." You now have to get rich, or you've failed."""
In this essay, his opinion seems less absolute than the other one. I could summarize as, "Accept consulting as a means to an end, not an end in itself." Indeed, that is the advice I heeded so perhaps he's right after all!
I am consulting again this week. It will chew a week that I could have done marketing for AR with, but the invoice will make things much easier for me. Partly it will pay for some work to accelerate AR's revenue growth, and partly it will pay for a mini-vacation with my girlfriend to meet my family. (If that suggests mid-term plans not often associated with startups, well, what can I say, I'm quirky.)