Episode 115 | The Pros and Cons of “Proposition HN”

Show Notes

“Proposition HN”: http://news.ycombinator.com/item?id=5037694


[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be running through the pros and cons of Proposition HN. This is Startups for the Rest of Us: Episode 115.

[00:12] Music

[00:19] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[00:28] Mike: And I’m Mike.

[00:28] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. I think the word this week is AuditShark launch.

[00:35] Mike: Yes, it is.

[00:36] Rob: So, we’re recording this one day after the 14th which was your planned launch for AuditShark. How did things go?

[00:42] Mike: So, everything is out there and people who have been given the access code to get in can go in and download it, you know, the early access people that I have been working with. So, everything is available to them right now. There’s a few minor glitches that I have to work out still which will hopefully be resolved by tomorrow. But everything is in place right now and functional and usable. So, we’ll see how things start to shake out the rest of this week. But I’m going to be touching base with people and walking them through things and getting any feedback from them about what makes sense, what doesn’t make sense and any usability, flaws that need to be flushed out or people looking for different reports or don’t understand how something works, I definitely want to get to the root of those issues pretty quickly so that I can start working on other things.

[01:26] Rob: Very good and in terms of marketing, when do you see yourself hitting that and kind of driving new…new customers to the site?

[01:33] Mike: Well, I put together a list of things that I wanted to do for the AuditShark launch and let’s see here, I used to have forty different things on here. I’m down to 31. The problem is that the number fluctuates up and down as I think of new things and as I knock things off. That process is currently in place and I’m working…just working through everything but obviously, some things take a lot longer than others to do.

[01:55] Rob: Got it, so you’ve already started marketing is what you’re saying?

[01:57] Mike: Yeah.

[01:58] Rob: And in terms of timeframe working with early access customers, you said you’re probably going to iterate on the product pretty quickly and do some minor usability and report stuff. How long do you perceive that taking?

[02:08] Mike: Well, assuming that I don’t run in to any show stoppers then I would anticipate that it’ll probably be three or four weeks. I have tentatively in the development schedule. I think it’s February 26th or something like that for kind of a full-blown go live but we’ll see how that works out.

[02:24] Rob: I see. So, full-blown go live at end of February and so now, would you say you’re like at soft launch? Or would you say this is early access? What would you define where you are right now?

[02:33] Mike: I would say this is more early access. I think a soft launch to me is more you’ve got it out there publicly available. You just haven’t told people about it. Whereas what I’ve got, I feel like it’s more of an early access where it’s by invite only where I’m working with very specific people and trying to figure out what things work for them, which ones don’t and making sure that any issues that they have are resolved so that when I do go live with it to the public, then hopefully, all those issues are taking care of or at least as well as I can at that time.

[03:02] Rob: For my end, I’ve been running a couple of HitTail marketing approaches that I had mentioned in last week’s podcast. And one of them was very inexpensive and it worked out shockingly well. Just a lot of people coming in and then the other one was quite expensive and so far, not worked out very well. So, it’s one of those times when, you know, things would work out the opposite way you think it’s going to. But in the end if 1 out of 2 of my marketing experiments works, then things could be worse so I’ll put it that way.

[03:30] Mike: How did your info graphic goes so far?

[03:32] Rob: Info graphic is okay. Yeah, it’s not like a homerun but it’s, you know, it’s probably a single. We just launched it this morning. So, I’m 5 to 6 hours in. So, you don’t really know what it’s going to do yet but it’s decent to…it’s nice to get a good bit of content out there. I mean it’s definitely driving some users who are signing up for the e-mail list. We’ll see if that ultimately drives some trials down the line.

[03:52] Mike: Very cool. So, I’ve moved my blog to WP Engine and I’ve had my WP Engine account for, I don’t know, probably almost a year at this point but I haven’t move my blog over because up until now I just did not make it to the top of the list but it’s early on the year. So, I’m like, okay, I’ll move it and in about a quarter, my RSS subscribers dropped off in moving. So, I’m trying to figure out where the RSS feed is that they’re actually subscribed to and it’s just kind of a pain because I —

[04:19] Rob: Right.

[04:19] Mike: …obviously don’t see any of the 404 Error messages. [Laughter]

[04:22] Rob: Yeah. Oh, so did you had multiple URLs where people could subscribe then one of them —

[04:27] Mike: I think so. I’m not…I’m not absolutely sure because I don’t – like I said if I had access to the 404 messages on the server, then I’d be able to see that but I just…I don’t see that right now. So —

[04:38] Rob: Got it —

[04:38] Mike: I should…I should have looked at it before I moved everything over but I didn’t think about it.

[04:42] Rob: Yeah, that’s a bummer.

[04:43] Mike: Oh well.

[04:44] Rob: Well, I received my final videos today from that video training course I’d been talking about where I have my product manager interview me about how to hire a VA for startup. It’s about 50 minutes of video. And it looks good. I also have audio. I’m going to get it transcribed and I’m looking at a February launch for that. So, if folks are interested, softwarebyrob.com and sign up for the newsletter there in the upper right.

[05:04] Mike: That’s cool.

[05:04] Rob: Yeah, it’s exciting. So, it’s fun to do new things like the process itself stretch me because I’m not used to doing that type of the in-person set up with, you know, with the videographer and the whole set up in my living room. There’s a lot of fun and now watching the videos, you know, I can really see…I can see room for improvement but I also see a lot of value in the information that we put down.

[05:22] Mike: That’s awesome. So hey, did you…did you notice that Amazon’s kind of did a way with some of the things that they’re selling through Amazon Prime where now if you buy certain things they’ll tell you that it’s eligible for free shipping but only if you have it shipped with other things.

[05:37] Rob: Yes.

[05:38] Mike: But I definitely have noticed an up taken the number of things where next to it, there’s a little bit of text that says, “This is eligible for free shipping with X,” or you know, with something else.

[05:48] Rob: I think I went to buy a toothbrush and it said that and they have a little word for it. I can’t remember what that word is. There’s a little label on it that says, “You know, ships with others,” or “Ship free with the…” I mean it’s kind of a little tag so that you can see it pretty easily and identify it.

[06:00] Mike: Yeah, I think that’s what it is. It’s “Ships free with something else.”

[06:04] Rob: I can’t believe. I mean I’ve ordered things that are a couple of dollars that they’ll ship with Prime and I kept thinking to myself there’s no way they can be breaking…even breaking even on that. So, this is probably their way of trying to reduce that and for me, it’s worked out fine because I just…I order enough from Amazon that I can always just throw it in my next order.

[06:21] Mike: The interesting thing to me about this whole thing is that if were it another company that I didn’t necessarily care for or care about, I’d probably be more than a little bit upset about this but because it’s Amazon and I’ve had such great experiences with them over the years that it doesn’t bother me at all. I look at this particular move and I understand not only the business reasons behind it but I don’t be grudge to them for doing it, you know. If it was like the post office that did something like this, I’d be screaming bloody murder. But because it’s Amazon and you know, I’ve had stuff come to me where I’m like, “Oh, this hard drive is bad,” or you know, I plugged it in and it just doesn’t work and I’ll just send them an e-mail or use there support page and it’s like boom, you got an instant RMA, free shipping both ways. They’ll just take care of it. And because their customer service is so good, they’ve kind of established that great relationship with me such that I’m willing to cut them the slack whereas like I said if it was like the post office or certain other companies, I probably wouldn’t.

[07:14] Rob: There’s definitely something to be said for not only keeping your customers happy but building…building that relationship with them so that they give you the benefit of the doubt if you screw up. We saw this happen. It was last year when we were still have the Academy on DreamHost and we were having outages interment here and there and people really kind of slack, you know. I mean we…we notified people. We posted it in the forums. We apologized but we didn’t get a single angry e-mail about it and I know that there are people who can log in and that was a bummer and obviously, we eventually moved up to WP Engine but it was…it was a testament of people giving us the benefit of the doubt knowing that we are doing everything we could to try to improve the process.

[07:50] Mike: Yeah, the other interesting thing that I found was that LinkedIn has been starting to send highly-customized e-mails to people. And I got one yesterday that showed enlarged photos of 20 different people that I’m connected to and they showed a statistic that related to all of them. And I think this…I think the statistic was something like 16% of your network has changed jobs in the past year and I thought it was really interesting that they are mining the data to that extent such that they’re giving you personalized e-mails like that.

[08:19] Rob: Yeah, I can only imagine that it benefits them because you’re now talking about it. It was a surprise to you or it was shockingly revealing or just shockingly insightful about your own personal information. They told you something you didn’t know about your own professional relationships. So, that means the next time you get a LinkedIn e-mail and probably the next time I get a LinkedIn e-mail, I’m going to open it now because I’m curious to see what they pull out of to my network as well. You know, obviously this raises the…always raises the privacy concerns or whatever. But it’s like if you’ve give them information and you’ve linked up with people, it’s just data to them. They can mine it most ways that they see fit.

[08:52] Mike: yeah, I think I looked at it more from an interesting marketing standpoint where if you’ve got such a wealth of data about a specific item or specific person or a network of people, then you can do different things with it and it was just an interesting way of taking that information, aggregating it and then showing it to an individual and that individual being me, then it was personalized to me based on the other people. And I’m sure the other people got a similar e-mail. So, it’s not like I was the only person out of…sign up they have that got that e-mail but the fact that they went to that level and calculated it  for me, it appeared that it was just kind of a personalized bit of information about my network.

[09:30] Rob: I think it’s actually an interesting idea that, you know, even a small software or service operator could do to send out kind of a year-end summary of your customers either activity or just some interesting…it’s almost vanity metrics, right? It almost doesn’t have to be that interesting. It could be kind of a little info graphic or just a little HTML e-mail containing, “Hey, you had these many keywords last year and you know, these many clicks,” or  whatever. I mean that’s the HitTail example or you can look at anything if you have proposal software. You could say you sent these many proposals and you know, just too like a big…big recap of it. I’ve never done that but I would certainly would…I certainly received some from I think InDinero sent one and I think like when I used to have Mint.com, they would send out monthly and annual recaps. Definitely get you to open one of their e-mails.

[10:15] Mike: Very cool.

[10:16] Music

[10:19] Rob: So today, we’re talking about Proposition HN which is an anonymous post on HackerNews where someone with the username HMEXX. He says, “I will pay $8,000 for you to build your side-project or MVP.” And this post got 1,000 uploads. It had one of the most active discussion thread that I’ve seen in a long time. And there are people on both sides of it about the pros of doing it, the cons of doing it, whether it’ll work, all that stuff. So today, you know, you and I kind of batted around the e-mail a little bit and realized that this could be a good discussion topic just to talk about it from both founder perspective and also from his perspective. So, you know, I think we just…we dive in. I’m going to read a little bit about his initial proposition and then we’ll run through the pros and cons and bat those around. When he posted it, it’s…it’s only about four or five sentences long and we’ll post a link to this obviously in the show notes.

[11:13] He says, “I will pay $8,000 for you to build your side-project or MVP.

Premise 1: Investors and Incubators over-estimate their ability to pick good ideas and startups. Premise 2: An MVP built by a lone, but talented techie is almost as likely to turn into something ‘successful’ as a startup on AngelList that has: 4 founders, 9 advisors, 13 press releases, 600 followers, etc.

Premise 3: Most freelancers will not build and or follow-through with their ideas, because they perceive their opportunity cost to be too high.

Premise 4: HackerNews has a decent number of talented freelancers with good ideas.” Now, I don’t think either you or I agree with all these premises but that…this is what he’s laying out. And he says, “Based on these premises, I present The Proposition [Version 1.0]: I’ll pay you $5,000 to build the MVP of that idea you’ve been kicking around  in your head for the last year. Once you’ve done it, ideally within 2 months, you can go back to earning your full potential. At this point, I’ll take over. I’ll spend an additional $3,000 to acquire enough users or customers for us to evaluate the project’s likelihood of success. We split the resulting company 50-50, as equal co-founders.”

[12:18] So to begin, I want to give a hat tip to Scott Underwood who contacted me about this and we also e-mailed about this and it wouldn’t be on my radar without his e-mail. But now, you know, we’ve broken up some talking points in the pros and cons. I think it’s easy and natural to want to immediately jump to why this won’t work. So, we’re actually going to dive in to the pros first. So you want to kick this off? You know, talk through a couple of pros of, you know, why this might actually be a good and innovative idea?

[12:44] Mike: Yeah, so two that come to mind off the top of my head is that if you’re a developer and you don’t know anything about marketing or you don’t know how to market and find your customers, this is like an instant marketing co-founder. And in addition to that, it gives you an instant accountability partner. So, if you’ve ever had problems getting started or following through with the stuff, this is a great opportunity for you to essentially get it carried in front of you where someone is going to pay you to work on your own idea and then as you follow through with it, obviously, you get paid for it and then in addition to that, you get this 50-50 split of the company afterwards where you’re an equal co-founder and the whole thing.

[13:20] Rob: Right and I think that that segment of developers who don’t want a marketer, don’t know how to market is massive. I mean you and I know it from just in our dealings with people who are trying to do startups and trying to, you know, become micropreneurs. It is probably been number one hurdle that I’ve seen developers have to get over is to get that desire and build the skills of marketing. I think that might be the number one pro of this whole thing if you really are a developer who doesn’t want to get in to that side of it.

[13:49] Mike: One of the things he’s doing is he’s essentially hiring you as a programmer and somebody on the comments had mentioned that he’s hiring you as a programmer for $25 an hour and paying you with the equity to stay on as technical co-founder. In his initial post he says $5,000 for ideally completing this within two months and if you do the math on that 320 hours over the course of two months, that actually works out to more like $15 an hour. But still the fact of the matter is you’re still getting paid to do it at a rate that is in some ways manageable especially depending on where you live because if you live in a place where you don’t have a lot of bills or a lot of expenses, you could definitely make $15 an hour work. And being able to keep the equity afterwards as a technical co-founder is just awesome because chances are good that if you’re a developer, you probably want to concentrate on the code anyway and handing off the marketing side to him is kind of a bonus.

[14:39] Rob: Right. If you have a crummy job and you’re making minimum wage or a little more, even if you’re making decent money but you can live on, you know, a tiny sliver of money on this 5 grand for a couple of months, but you’re smart and capable, then this is the kind of opportunity that it seems reasonable that you would want to think about, right? I mean if you look at what Y Combinator pays, they do is it $6,000 per co-founder? I think.

[15:04] Mike: It is —

[15:05] Rob: Yeah.

[15:05] Mike: …but it’s also, I think they also add on another $6,000. So, if you have two founders, then it’s $18,000.

[15:11] Rob: 18 grand, right and it is three months. In essence, it’s 3,000 bucks a month per founder if you had two co-founders and from what I hear, they’re just basically coding like 15-hour a day is that whole time. So, if we break it down to hourly rate, this guy may actually be paying you more per hour. Now, there’s the…the con of that is that he’s not Paul Graham and they don’t have, you know, he doesn’t have all the investors on the other end of it. But when you really break it down like that, it’s at least an interesting thing to evaluate. I also think it’s just a gutsy idea, you know. It’s a nice experiment. I’m impressed that the guy is willing to put his money where his mouth is. I’ve thought of doing this on my own. You and I have thought of doing a similar kind of a micropreneur Y Combinator thing and it’s a lot of time. There’s a lot of money involved. I mean for him to come out and just do it is a bold move.

[15:57] Mike: Yeah, it’s funny you bring that up. It’s been a while since we even discussed that but you’re right. We did have that idea a while back where we’re like, oh, you know, what if we came up with the Micropreneur Academy funded endeavor where we fund the people to do something like that kind of a scholarship or something along those lines. But you’re right, I mean to actually come out and do it is just…I’ve never seen anyone else to actually do it.

[16:17] Rob: I think the last pro I can think of is that although this could be seen as like kind of an accelerator, you know, Y Combinator is called an accelerator now and TechStars and 500 Startups I think. I mean there’s a bunch of them around the country. His is different because you don’t have to move anywhere. So, it could actually apply to people all over the world. It could apply to you if you aren’t able to move and you live maybe in a middle of nowhere and don’t want to move to a major city where there are accelerators. So, I think that has one advantage. One thing he did say later on in the thread, he says, “If you can get in to Y Combinator, I can’t compete with that.” So and that does makes sense, right? He’s an unknown. He’s only giving you a few thousand bucks. He doesn’t have the…the clout that Y Combinator could bring or an accelerator like that could bring. But what he’s saying is there are also some pros to do it this way because then you don’t have to move to a new place. You don’t have to uproot your family. You really can kind of just if you have the flexibility to take these two months off of your freelance work, it could actually be a reasonable thing to think about.

[17:18] Mike: Two other things that I also came up with this is the first one is he’s specifically looking for single founders. So, if you are the lone wolf type of person, I mean he’s exactly who you’re looking for. The second thing is that he’s the only person that you’re actually going to be working with. I mean it’s not like you have to pass a committee or anything like that. It’s his decision upon, you know, accepting your idea and going forward with the funding, you don’t need to worry about this team people thinking you got ideas, good or bad, you can just go with his. And as long as you’re just incorporating feedback from one person, it tends to be a lot easier to work with one person that it is with multiple people.

[17:54] Music

[17:57] Rob: So, let’s dive in to the cons now. And I have to be honest, the cons list was very easy to come up with and it got long quickly. And so we actually edited a few of them out of this list.

[18:09] Mike: I think the number one is that who is this guy? [Laughter] Does he have any credibility or is he just some guy with $8,000 laying around? I mean the fact is that he’s only giving you $5,000 of it and don’t get me wrong. I think that it’s good on his part or at least, you know, it’s good in my eyes that he’s saying, “I’ll give you 5,000 and then I’m going to take $3,000 and I’m going to set that aside in order to market it.” But the fact is you have no idea who this person is. Does he have any kind of experience? Or is he just some guy with 8,000 bucks laying around that says, “Hey, I want to give this a shot.”

[18:40] Rob: I agree. The anonymity is really a big deal for me because if he can mark it, why is he concerned about people knowing who he is? And during this thread, a lot of people point this out and he says, “Well, you know, you’ll see who I am on our first Skype call.” I just don’t understand why he would do that. What the advantages for him to do that? Someone in the thread joked that it might be Jason Calacanis behind this whole thing. I don’t think that’s the case but it sure will be funny if it was a big name founder that we know and that’s why he’s being anonymous. But again, why would you do that? If you’re a big name founder, this would attract so many more people of higher quality because they’d be going after not just the money but they’d be going after you for your name and your guidance and your involvement in their startup. So, I can’t imagine he’s, you know, “famous” or a really well-known startup founder.

[19:29] Mike: But at the other side of that is that it could be and that could be exactly why he’s being anonymous because he wants to prove a point. Maybe he’s got some side that was with somebody or he’s just trying to prove a point to somebody else that, “Hey, I can go out and I can do something similar in a fraction of the cost.” And you can almost think of it like basically lean startup mode for angel investors. I mean maybe that’s who the guy is. Maybe he’s an angel investor and this is the kind of thing that he is doing or interested in doing and he wants to prove to another angel investor that it’s possible. So, they don’t have to shell out tons of money and putting, you know, tens of thousands of dollars. They can put it some ten thousand dollars work on at something that’s got a reasonable chance of working. And they get more equity as part of it because with the angles and stuff, you’re not going to get 50% and you’re…you’re going to be shelling out tens of thousands of dollars more. So, it could be that somebody is trying to test an idea and, you know, and use in more lean startup methodologies to try and figure out that stuff earlier rather than later.

[20:28] Rob: He does that more detailed about who he is in…in a FAQ later and he says, “I’m also a techie. I’ve had one moderately successful venture so far which has given me a comfortable life but not quite retirement amount. I want to reduce my coding time and instead help people get their ideas to market using my resources. Hopefully, we can build a few success stories along the way. You can find out more during our first Skype chat.” So, another con is that 8,000 bucks like we’ve already said and with only 5,000 of it going to you is not a lot of money for 50% of an idea especially if it’s a reasonably sized product or something that actually has, you know, a market that means the startup is going to grow. If you have confidence in your idea and you think it could be something that could grow beyond just a few thousand bucks a month, it’s just 8 grand…isn’t that much.

[21:18] Mike: You’re right, I mean as you said to top it off, you’re not getting 8 grand. You’re getting 5. So basically if somebody is paying you $5,000 for your idea and it’s not like you just give them your idea and you walk away, you’re still expected to work on it for the next 2 months. So, being able to use that $5,000 in, in many ways can be very difficult to make that money stretch especially if you have a fulltime job. And this is I think the other thing that really gets me about this is that if you have a fulltime job, how are you going to take two months off to work on this idea?

[21:50] Rob: Yeah, he specifically said that he kind of addressed that because someone raised it and he said you probably need to be a freelancer if you’re doing this and you need to take time off client work and that’s what the $5,000 is supposed to try to offset is some money, maybe not all, but some of the money that you would otherwise have made from freelancing. And I think that’s a tough sell for a couple of reasons. One, I mean most freelancers I know make more than 2500 bucks a month, a lot more. And so if they can just save up 5 grand over a few months, you know, why…why wouldn’t they take that approach instead of going this route. I mean I guess that he’s the marketing guy and if it’s his money, then all the better. I think the other demographic this could appeal to is if you’re a college student or like just out of college. You don’t have a job yet. This could be a great summer project and that’s what Y Combinator really started out as was originally going after undergrads.

[22:37] So, 5 grand is actually a decent chunk of change if you’re, you know, living with your parents or living with roommates and you do have two or three months off from school, it totally makes sense why you would…why this would potentially be a better deal. This deal is obviously not for…it’s not just not for everyone, it’s actually only for a pretty tight demographic and that’s probably college students or someone who’s out of work or someone who has kind of a low freelancing rate or someone who lives in the part of the world where $5,000 is several month’s salary.

[23:07] Mike: I wonder if in some ways that isn’t a self selecting group specifically design or intended to get those people who haven’t run in to issues with launching products because they don’t know what they’re up against. So, they’re going to basically beat their heads against that wall even harder in order to get through it because they don’t know any better.

[23:24] Rob: So yeah, you’re saying he’s basically self selecting a group that is more likely to persevere because of their lack of experience with this kind of thing.

[23:30] Mike: Right.

[23:31] Rob: I think another thing is if he really going to market it forever for just 50% of the company? I mean how much attention is he going to be able to give 10, 20, 30 of these ideas because he doesn’t talk about how many he’s going to accept? And I question if he…if he does even if he can fund…let’s say he funds 10 or 20 of them and you know, a good chunk of them come through, how is he going to have a time to market them and is he really going to be able to justify it himself to basically have you step away maybe just do minor maintenance but you walk away with 50% of the company. There’s no vesting, right? It doesn’t mean you have to stick around for three or four years. You keep 50% of that ongoing. So, that’s actually I feel like he could kind of get hosed on that long term.

[24:13] Mike: Yeah and the other thing that isn’t really mentioned here is that what constitutes done? What is considered done in this scenario or that could, you know, do you get your 5,000 upfront? Do you get your 5,000 after it’s done? You know, how many bugs are there? And those kinds of things because obviously, I think if you’re the type of person to go in to this, you want to launch the product and he obviously has an interest in launching the product. I mean he’s got at least $5,000 worth of effort invested in to it plus the other 3,000 so he wants to get it out there and get people using whatever that product ends up being. But in terms of done, I mean what…at what point do you say, “Well, I’m completely done with this and I’m not going to do anymore code on it.” Is it something that you’re going to continue working on? And maybe that’s part of why the equity is 50% split because if you only give somebody a 10% equity on it, then chances are good that they’re not really going to go want to come back and do bug fixes and respond to customer request and things like that.

[25:07] Rob: Yeah, someone mentioned that mobile apps would be a really good way to go with this and that actually makes sense, right? Because then there’s…doesn’t tend to be as much maintenance ongoing with them over that and you really could build a decent mobile app in a couple of months like this.

[25:20] Mike: Yeah, that does makes a lot of sense.

[25:22] Rob: One of the other cons that someone brought up is that is it possible this guy he’s staying anonymous because he’s trying to collect the best startup ideas to steal them. What do you think about that?

[25:32] Mike: I seriously doubt it. [Laughter]

[25:33] Rob: Yeah, I know. I saw that and I was like, oh grown —

[25:36] Mike: Yeah, here we go with…we’re trying to put evaluations on ideas because how do we know ideas are worth virtually zero. Implementing ideas can be really expensive and even if you steal an idea, you generally tend to lose a lot of the vision behind that idea. I mean you can look at any software product that’s out there or you could try and rip it off and you will do a reasonably decent job of making a clone of it but there are certain things that are going to be lost in translation when you’re trying to copy it. And some of those are going to be company related, some of them are going to be product related. You’re going to do things a little bit differently and a lot of times there are some very good reasons why software is designed in a specific way. The one thing that I had was a…I had a conspiracy theory about this. Maybe this entire post was just a hoax and an attempt to get HackerNews karma.

[26:21] Rob: Isn’t every post a hoax in to an attempt to get HackerNews karma?

[26:25] Mike: [Laughter] I don’t…I don’t know. I don’t read enough —

[26:27] Rob: Kind of. I’m interested to see if we’ll see a follow up from this guy.

[26:30] Mike: Yeah.

[26:30] Rob: You know, he said he got such an overwhelming responds from this that he…the e-mail account was overwhelming that he couldn’t even go through all ideas. I’m curious to see if there’d be, you know, he’d following with either the best ideas or just letting us know if this thing ever comes to fruition.

[26:47] Mike: You know, I just had a great thought. I could send him the idea for AuditShark and I could get $5,000 right away.

[26:53] Rob: Do it, do it. He specifically says, “I can’t compete with you if you’re earning a 150K a year or if you’ve already been working on your side project for a year. This may not be for you.”

[27:03] Mike: Oh.

[27:03] Rob: So, you know, he kind of specifically says that. I think the last reason that this may not fly very well is at 3,000 bucks is not a heck of a lot of money to test an idea unless it’s really designed, unless he picks them exactly to work with things that work well with paid acquisition, it’s hard to know in $3,000. I mean I have blown through that in a few days doing test marketing. The fact is your messaging could be wrong. I mean there are so many things that could go wrong with it. The product may actually be able to fly and you may just need to invest a little more time in to it. So, I think you could get a lot of false negatives if you caped your investment at, “Oh, I’m only going to spend $3,000 in, you know, one month or something to try to test this thing.”

[27:41] Mike:  think that related to that my biggest issue is that that $3,000 to test the market is not necessarily being done before you start building this because —

[27:50] Rob: Right.

[27:50] Mike: …I would think that you’re better…much better off testing that market first for the $3,000 and then deciding at that point whether or not to go through with the $5,000 investment to actually build it. At that point, why would you bother hiring somebody to give them 50% equity? Why wouldn’t you just go outsource the entire thing and hire somebody as an hour by hour basis and have them just build everything that you want.

[28:14] Rob: If you’ve listened to this, my guess is you stay in pretty firm on one side of the fence or the other. My guess is more people lean to the ‘no way you’d ever sign up for this’. So, if you think this is actually an interesting idea or it’s something that fits you and that you are going to apply for or consider applying for, I’d be interested to hear from you either in the comments for this episode or calling it in to our voicemail number or e-mailing it to us and that info is at the end of the episode.

[28:38] Music

[28:42] Mike: We do have a listener question to go through. This one is from Joe Rolenson [Phonetic] and he says, “Since you guys have already published a book or have been talking about it, how do you forecast a healthy sales volume? You could base it on conversion rates of those that buy on your own site but that doesn’t account for customers that find your book on Amazon.com or third party marketplaces. How do you know when your sales had plateaued or if there’s still more potential? Thanks. Joe.”

[29:02] Rob: With my book, I didn’t forecast recurring sales volume. I only looked at what is the minimum number of copies that I need to sell to justify me taking the time to write this book. And for me it was building a landing page and seeing how many e-mail addresses I could get and that showed me how people are interested in it. And once I hit a certain number and I think it was 600. It was somewhere between 6 and 700 e-mails, I figured I could close at least a third of them. I figured that they would, you know, be interested enough in the topic and as it turned out, 50% of them bought. And so I made…I think my goal is if I made 6,000 bucks, you know, with the initial launch that that would justify the hundreds of hours [Laughter] that you write the book because I really…I did want to write the book and I was just looking to kind of justify the time and be able to cover it with some type of evaluation.

[29:53] Now, I think in the first 72 hours, it actually made 9,000 but that was top line revenue and then there were printing cost. So, it was somewhere in the 7,000 and change was…was the net profit on that. And at that point, I was happy that the book had basically in my opinion covered the cost. From there, I had no clue what it would do and as it turns out, it did really well. It sold, you know, over the past two and a half years, it sold 10,000 copies. And I did not forecast that and I wouldn’t have counted on that. From what I have seen though, the volume from your own website and Amazon are the only two that really matter. The other third party marketplaces I have submitted to have…haven’t done much for me. But if you’re in a specific niche and there was a niche marketplace, I could imagine that that sales from that could be a little higher.

[30:40] Mike: I think on my end, I don’t really have any good advice to give on forecasting a healthy sales volume. I mean I like Rob’s approach where he just kind of decided, you know, what was the minimum number that he needed to sell and didn’t concentrate on any sort of recurring sales from that. The book that I’m looking at writing would be done through a publisher. So, they already have numbers on what similar books sell. So, for them, it’s more a matter of is this going to make it worth it for them and if it’s going to make it worth it for them, then it would probably make it worth it for me.

[31:10] Rob: Right and for you, you’re writing it more for as a marketing tool for AuditShark and probably as a personal goal or professional goal of writing a book rather than as a source of income because the…going through a publisher, the income is not going to be anywhere near what you even make on, you know, as an hourly consultant or what you’d make self publishing it or from your software apps for that matter.

[31:30] Mike: Right and that’s…that’s exactly right. There’s two real goals that I have in mind. One is bringing knowledge to people who probably need this type of knowledge and the other one is bringing some publicity to AuditShark. So, you know, I do see it as definitely a marketing thing but at the same time there are things that people, I feel like need to know about this particular topic that they just don’t have any idea about and it’s because there aren’t any real books about this particular topic. So, you know, we’ll see what the publishers will have to say though.

[31:57] Music

[32:00] Mike: So I think that wraps us up. If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.

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3 Responses to “Episode 115 | The Pros and Cons of “Proposition HN””

  1. The proposition is a fantastic deal for students or unemployed developers, but a pretty crappy one for people who don’t particularly need the $5,000. I don’t think there’s a lot of middle ground.

    Which is fine. He has a particular kind of person in mind, which isn’t a million miles away from the typical YCombinator applicant, but probably is quite different from most people who are interested in the micropreneur approach.

  2. Wooohooo Mike!

    Congratulations on making it to launch with AuditShark!

  3. I make very little money a month but for 5k im better off hustling and working side jobs and freelancing getting 5k then using virtual help like you guys mention and never giving up any equity. If he wanted even 30% equity this may be a different situation