We've been bootstrapped since the beginning, but, as much as we don't want to admit it, we're starting to outgrow what we can do as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away.
We have plans to expand to 150 schools across the country, and if we do that we project to be cash-flow positive within 6 months. But right now we don't have enough resources to expand to even 10 schools and try and maintain that. And especially with how our demographic (college students) respond to word-of-mouth with services like these, we really want to be available to as many students at as many campuses as possible before we lose any "buzz" that we're cultivating (either organically or through marketing efforts).
With regard to legal documents and accounting and all that, we have an LLC right now, with Quickbooks and a boilerplate operating agreement that I found in a book at Barnes and Nobles. I definitely agree that it is incredibly important to be on top of the legal side of things, but we honestly don't even have the money for that right now.
"as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away."
Bootstrapped = your profits are able to grow as your company grows. It sounds like you have an expensive hobby at the moment. Either scale back your operations so you're profitable or grow your numbers.
Why not grow at the rate you can sustain? Rather than taking on 150 schools, grow by as many schools as you can afford with the profits from the initial set.
"we really want to be available to as many students at as many campuses as possible before we lose any "buzz" that we're cultivating (either organically or through marketing efforts)"
Another fear can be competitors who may have more money and can grow faster than them, especially after posting his story here on HN.
Being on the HN frontpage is really going to expose you to both opportunities and competitors. Taking funding is probably a winning strategy for you right now
Piggybacking on some earlier comments, the "sell ads to local businesses" model is a tough one to scale (using the common startup definition of scale to mean "grow exponentially"). However, that doesn't mean you can't grow your business into a nice little income source that, ideally, won't take much management (since your users are college students, people who move often, and a market that has a built in supply increase every year, if your service works for them, advertisers who see a benefit will likely continue to pay you once they are onboarded). You can probably get to this point (focus on the top 10, then 25, then 50, etc. colleges in terms of student population - I'd look at new student population, to be honest, as well as adjusting for % that live in non-university housing).
From your comments, I don't think you should worry about trying to join an accelerator or get a largish amount of funding - that will just push you to make the Groupon mistake and spend too much money on local sales. My recommendation - see if you can raise money from friends, family, your university, or any local entrepreneurship groups (in Austin, for example, there are several organizations that exist nearly entirely to help students get through the part of founding a company you are in). From there, were I running the company, either you or your cofounder should shift entirely to onboarding schools (or hire someone to focus full time on this if you each are actually needed on other projects). Create a "college rep" program, and offer either a small stipend (college students will work for tiny amounts of money, especially if they can then put "worked at startup in school" on their resume) or in kind services from your advertisers (half off mattress, free move, whatever they'll offer to you). Build quickly from there, and keep promoting it. If you're business model is real, it will become apparent quickly, and you can think about raising real money then.
> With regard to legal documents and accounting and all that, we have an LLC right now, with Quickbooks and a boilerplate operating agreement that I found in a book at Barnes and Nobles. I definitely agree that it is incredibly important to be on top of the legal side of things, but we honestly don't even have the money for that right now.
The main benefit of having shareholders and operating agreements is not in having a piece of paper, but having discussed and agreed on the principles with your co-founders. A boilerplate agreement is entirely useless, unless you all have thoroughly read and understood, and agreed with it.
Instead, I would recommend sitting down with everyone one evening, and coming to a mutual understanding about questions such as:
* How is ownership currently split between co-founders?
* How much do you pay yourselves salary? How should this change in the future depending on revenue or investments?
* Under which conditions would each of you consider selling the business, versus keeping on growing it?
* Who is allowed to purchase stuff with the company account, and when do they have to confirm it with the others?
* If one of the co-founders decides to quit (fantastic job offer, just tired of the startup, etc), what happens to their ownership? Do they keep all of it, lose all of it, or keep and lose some parts depending on time with the startup?
* If one of the co-founders doesn't quit, but just takes a side job, starts ignoring you, or becomes an asshole, are the others allowed to fire them? What are the share ownership outcomes of that?
* Are the owners allowed to sell their shares to outsiders?
* What happens if one of the co-founders dies or becomes disabled and incapable of working? Do their relatives inherit their ownership (this is probably the default!)?
One of the main causes of startup implosion are co-founder fights, and these in turn arise from not having discussed these issues beforehand. It's best to do it before the problems arise, and before there is serious money on the line.
If you have actually debated these questions, you are already ahead of many startup teams. You can also just write them down in plain English on a single sheet of paper with everyone's signatures - that will count as solid evidence if it ever goes to court.
And if you have plenty of cash later on, you can take that sheet to a lawyer to get a "proper" agreement. After all, a lawyer cannot and will not tell you the answers to these questions - they just write up what you have decided in more detail based on local laws.
We have plans to expand to 150 schools across the country, and if we do that we project to be cash-flow positive within 6 months. But right now we don't have enough resources to expand to even 10 schools and try and maintain that. And especially with how our demographic (college students) respond to word-of-mouth with services like these, we really want to be available to as many students at as many campuses as possible before we lose any "buzz" that we're cultivating (either organically or through marketing efforts).
With regard to legal documents and accounting and all that, we have an LLC right now, with Quickbooks and a boilerplate operating agreement that I found in a book at Barnes and Nobles. I definitely agree that it is incredibly important to be on top of the legal side of things, but we honestly don't even have the money for that right now.