Michael Seibel, Y Combinator partner and Justin.tv co-founder, talks about launching his startup with $50,000 and surviving the early stage by living frugally. He explains how startups cover costs and why growth is critical to escaping the precarious early days.
So many of us were pre-financing, except for like Boost, for example. I was kind of curious your experiences looking at that. So when you guys were at Justin, you already had some YC stuff, I'd imagine. And then at any point, were you guys building a product with no money in the bank?
So the short answer is no. At Justin.tv, we started with $50,000 of funding, which Isn't a lot, but it's not zero, which basically lasted us for 6 or 8 months. So, yeah, the answer would be no. I think accelerators are a good— well, it's weird, right? Looking at the kind of folks that I see coming out and looking at what companies do at YC, A lot of the companies basically choose either to live an elevated lifestyle or not. And I feel like if you choose to not live an elevated lifestyle and you have any amount of money in savings, you probably can give yourself a year of eating Cap'n Crunch and ramen and work on your startup without funding. So I kind of feel like at Socialcam, the difference was none of us had a— I'm sorry, at Justin.tv, the difference was none of us had a job. before college, and so we had $0 in savings. And there were 4 co-founders, so I kinda look at that as, like, collectively, if we had each said, all right, we're gonna spend $12,000 of our savings to make this happen, it would have been the equivalent. So if some of you guys are right out of college with zero money in the bank, you know, I imagine it's a really hard situation. If you have any money in the bank, you can live as frugally as us. We I think we got paid $200 a month, so it wasn't like high on the hog.
Spending money, like you weren't spending it on yourselves essentially?
Like what was all that money going to? All the business was doing was, we all lived together, and so it was 4 of us in a 2-bedroom apartment, and so the company was essentially buying food, rent, and when we needed it, hardware and bandwidth. That was basically it. So that's kind of how we structured things in the early days, and each of us had like $200 a month per diem, and then I had student loans that were $200 a month, so the company paid those for me. I also racked up $5,000 worth of credit card debt during that period of time, but also a small price to pay.
Were you at all worried about running out of money for infrastructure costs and that kind of stuff?
No, because I guess the way that we thought about it is that if we grew, we would be able to attract funding. The way I think about it is that most startups are stuck— I don't know, this is going to seem like a very negative analogy, but I think it's actually accurate. Basically, most startups are stuck in the sewer, right? And you're kind of floating along in the sewer. It's not great. Pile of shit, but you're alive. And then basically, your only goal is to just get up to street level. You just wanna get up out of the shit. But the vast majority just struggle along in the sewer and then die. And so, I think it's like, these were things that were helpful that people told us in the beginning, some basic facts. It takes 7 to 10 years to exit your startup, and 99% of startups fail. Right, and so, the vast majority of startups never even raise a Series A, right? So, you're dealing— that's why I like to say everyone starts in the sewer, because everyone is behind from the beginning. It's like, everyone is behind. And then the real question is, can you climb up out of the shit? 'Cause you're born in the shit when it comes to a startup. And so, the way I think about it is that if you're already in the shit, taking risks, It can't get much worse than where you are. You know what I mean? Pre-launch, pre-users, pre-revenue, it can't get much worse. So the only way most companies get out of that situation is with growth. And so if growth's gonna set you free, you can't be afraid of it. If you run out of money because you're growing, that's a very rare situation. Situation.
