When you run out of money

The following article is based on a blogpost by Thor Fridriksson, founder of the football app Champion. He shares his honest experiences with running out money for your startup, without a way for getting further funding.

Thor Fridriksson developed the football app, Pumodo, in cooperation with Thomas Watson back in 2012. The product had a great start with good feedback from the first customers, a handsome angel investment and workspace in Silicon Valley. The concept for the product proved not to hold water and from there began the challenges for the two entrepreneurs. The team, who had added a new member, moved to Thailand to reduce costs. Here they came upon a new idea for a concept for a football app.

They changed the name to Champion, but had no prospect of reinvestment from previous investors, and where faced with some tough decisions. Thor Fridriksson writes:

Shark Tank
Our angel investors were divided. They had invested in Pumodo, which was a failure, and now I was asking them to believe in Champion. Two said no, but the third gave us an offer.

The amount was small, but would be enough to keep the company running in Thailand for 6 months. The offer was a large downward revision of the company’s values and would dilute us.

I do not think badly about him because of the low offer. He wanted to help us, but I must have failed when I was pitching the concept behind Champion for him.

We really needed the money, but the strong dilution would hit us again later in the investment rounds and infest us like a virus. Accepting the offer would also result in a lower morale between the founders. Our startup would be doomed in the end, if we accepted his offer. If we said no, we would have to shut down the startup.

We said no.

“I have seen a lot of exciting startups over the past 5 years, that I would have loved to invest in, but the distribution of the startup was already destroyed” – Marc Andreessen

We were in a big dilemma. It was clear to all three of us that we would like to continue and try to reach the full potential of the product. We had to keep working on it! We agreed to take the project through to completion.

However, how were we to pay our bills?

The backside of Freelancing
The easiest way for us to cover our expenses for Champion, was to do freelancing besides the work we did on Champion.

Thomas and Anders, two amazing programmers, got three offers as soon as the rumor about them looking for freelance work spread. We decided that we should stay full time on Champion and focus on our further development, while having a small income from the freelance work.

It also made sense to move back to Denmark, because the new jobs were located there.

It did not take us long to realize how demanding it is to run an ambitious startup, while having to do freelance work as well. The time you spend on your second job, does not match the time you take from your startup. There are costs associated with switching back and forth between multiple projects and clients.

It becomes difficult to stay focused, and once you start to lose focus, it will begin to go downhill within long. It takes longer time to develop the product and then the frustrations begin.

Loyalty can also be blurry. Whom do you owe the most? Work that pays for your food or the project you love? Where do you put in the extra hours?

Continuing to work alongside your startup is never a good idea, an annoying necessarily in our case.

Back on Track
Thor Fridrikssons and his partners’ hard work seems to have paid off. After a promising test of their new app, the investors’ interest have been awakened again, and the office has temporary moved to Lisbon. As it stands now, the new Champion app will launch on 1 April 2015.

If you would like to read the entire blog post by Thor Fridriksson, you can find it here.