Year of the Startup’s Origin Story (The Epic TL;DR Version) OR How I Became An Angel Investor While Working At A Sushi Joint
Written by Sabastian Hunt
In the past week, I’ve been asked at least 25 times to give the story of how Year of the Startup began. There has been a recent influx of people who are genuinely fascinated with what we do and how we got started. I suspect that it’s because my latest round of ideas have been sufficiently bizarre to warrant the question of how this strange mix of ideas came to be. Every time that I tell the origin story I manage to leave out some major part of the story. Because I’m forgetful, I’m writing down this blog post so that in the future I may direct people here to get the story.
Year of the Startup?
Year of the Startup is a residential pre accelerator program. We originally started in September 2014 with one small house. Today, we’re a 5 house, 35 bedroom live/work community for startup types and Airbnb guests located just up the street from Warren Buffett’s office in Omaha, NE. We provide co-housing, mentorship, and sometimes capital for startups. We’re taking a page from Kansas City’s book and building our own startup village here in Omaha, the Nebraska Startup Village (startup houses interspersed in a neighborhood)is a development located in a 3 block radius around 33rd and California Streets in Omaha’s Gifford Park Neighborhood.
This is the full story of how Year of the Startup, was birthed and came to be the way that it is. If any of the events in the backstory didn’t happen, I’m very confident that Year of the Startup would not exist. So here’s the story:
Year of the Startup, the concept, was the coalescence of several key events and experiences that came together during the last semester of my last year of undergrad at the University of Nebraska at Omaha. Here are probably way more details than you need to know:
- As a high school student in October 2005, I spilled apple juice on my beloved Xbox gaming console, leaving it in a state of permanent disrepair. Though hard to imagine at the time, this event turned out to be a blessing in disguise because in one fell swoop I freed up ~40 hours per week since I was no longer able to binge on Madden 2005 and NCAA Football 2004. The new found free time sent me on a 5 year quest to discover who I was/wanted to be and what I was passionate about.
- I got my feet wet in entrepreneurship in 2009 when I started a t shirt company called Nebraska Dreaming which made custom t shirts using heat transfer press technology. The business ultimately failed because the heat transfer technology was inferior to other available technologies making for a low quality product.
- Briefly living in 2 different residency programs (one at Growing Power in Milwaukee in 2011 which I was invited to and one at Cap Corps. in Chicago in 2010 which I was not invited to but “seamlessly integrated” into). I guess when you live in 2 residency programs that you’re more likely to create one yourself.
- The decision to study economics in college was key. An effective economist must understand culture really well and be able to model it. Your average inquiry into economics will at times feel like you’re researching each of the following majors: math, stats, programming, history, sociology, political science, philosophy, business, and accounting. When I was in school, econ majors were doing particularly well on GREs and LSATs which gave many econ majors the notion that they were more gifted/able than students of many other majors. While not true, this distorted perception of relative intelligence/ability can make a profound impact on oneself. Sometimes, the most important part of accomplishing a goal is simply failing to realize that the goal is far fetched. I think irrational confidence or an unstoppable mentality is helpful for entrepreneurial endeavors because a rational calculation of probability could drive anyone away from doing a startup and any mindset other than ‘unstoppable’ is likely to be stopped.
- Taking Dr. Art Diamond’s “Economics of Entrepreneurship” in Fall 2012. Myself and the other students in this cross-listed senior/graduate level class really lucked out by getting to study under Dr. Diamond, a top theorist of innovative entrepreneurship. Diamond taught us stuff that we had no business knowing about (unless we were trying to disrupt industries, of course). He emboldened us with his musings on William Baumol, Clayton Christensen, and Joseph Schumpeter (the guy who coined the term “Creative Destruction”) . Diamond introduced us to the emerging field of behavioral economics and told us about ideas like Libertarian Paternalism. He had us read parts of The Structure of Scientific Revolutions a book that gives a great theoretical basis for how technology is adopted. In short, we were introduced to ideas in undergrad that my friends in Ph.D programs weren’t familiar with. It was also in this class that I was befriended by my original co-founder, Jon Ochsner. Diamond also gave inspiration for Year of the Startup’s logo which is a gazelle — it was from Prof D. that I learned that gazelle in business speak means a high growth company with 20% growth or more for 4 consecutive years starting with a revenue base of $1,000,000 or more.
- My time as an intern with the North Omaha based nonprofit, No More Empty Pots, was an absolute game changer. Up until this internship (January 2013 — June 2013) I was on a tract to pursue a Ph.D in economics. Being part of a small team allowed me for the first time ever, to feel like my opinion counted and that my input was valued in a high stakes decision making process. The internship was unpaid in terms of direct monetary compensation but was high paying in terms of indirect, non monetary compensation such as building a professional network, acquiring real world knowledge, and getting a first hand account of how small organizations approach big problems in the face of severe budget constraints. The wonderful women at No More Empty Pots were even kind enough to provide office space free of charge when Year of the Startup was initially formed. It was also through No More Empty Pots connections that I met 3 of our founding board members.
- Dr. Phillips and Dr. O’Hara are both fantastic profs at UNO. Dr. Phillips taught an applied econ course, Economics of Urban and Regional Development. In this class, Dr. Phillips, a veteran of econ dev, in his former life was the director of the tech transfer program at Univ. of Illinois where Marc Andreessen was developing Mosaic. Dr. Phillips gave us the lay of the land here in Omaha, as far as econ dev, incentives, public-private partnerships, and legislation were concerned. Dr. O’Hara taught us Economics of Sustainable Systems, an unusual class where we would be as likely to discuss and model the complex vector geometry honey bees used to navigate as we would be to discuss law, semantics, or Thorstein Veblen’s Theory of the Leisure Class. O’Hara is a lawyer and econ ph.D who, simply put, knows his shit. O’Hara taught us how to negotiate, how to be persistent, and how to understand and respect the interconnectedness of systems.
- Because I was (and still am) a procrastinator, I put off completing a writing class until the second semester of my senior year. In this writing class we had to properly research and write a ~40 page report on a topic of choice. My prof, Dr. Lisa Cook, had us do an activity where we brainstormed research topics and presented the list to our classmates for an ad hoc peer review session. I went in to the project knowing the topic I was going to spend the semester writing about. When I presented my 10 research topics to the class they overwhelming thought I should pursue a topic titled, “The Black Propensity for Entrepreneurship.” It wasn’t one of my first choices, but I was easily persuaded that this would be a good topic of inquiry. For this paper I performed primary research interviewing business owners and was able to develop a theoretical framework about barriers to entrepreneurship and how to do entrepreneurship-centric economic development, especially in urban settings.
- In late Spring of 2013, I was sent on a meeting with Brigitte from the Union for Contemporary Art on behalf of No More Empty Pots to discuss a proposed North Omaha beautification project. I met her at the Union and she told me about her situation: the Union was attracting artistic talent from all over the world but had no where for the artists in residence to live. Being naive and about to graduate college, I casually said, “I can buy a house in North Omaha that your organization can use for a residency program.” I got back to No More Empty Pots to tell them about how the meeting went and I relayed this conversation to our project manager, Susan, who basically said it would be nice if I could do a residency house for No More Empty Pots also! 2 out of 2 people expressed interest in this residency model; this was the proverbial light bulb moment when I suddenly realized I should should start a residency program for my burgeoning passion: entrepreneurship.
The Groundwork Laid
A lot of things had to come together just to get to the light bulb moment. As I do with most things, I thought this idea was brilliant until I forgot about it. It wasn’t until ~4 months later after I had already graduated from UNO that I recalled this idea. I was reviewing notes on my iPhone when I came across a note saved at some ungodly time like 3:42 am on a school night — the iPhone note simply read, “make a house for entrepreneurs to live together.” The one sentence pitch was tucked in to a paragraph that was otherwise an incoherent stream of consciousness.
The first chance I got, I began going through my recently updated contact list and thought about who could I recruit to help put this idea into motion. I reached out to 3 or 4 people whom I knew, admired, and wouldn’t have minded working with. All but one said no. My former classmate, Jon Ochsner, from Dr. Diamond’s Economics of Entrepreneurship class liked the idea and wanted to work on the project together.
To start, the idea was going to be North Omaha centric. We were planning to take advantage of the affordable housing stock in North Omaha and invite 4–6 early stage entrepreneurs to live together for free and take a small equity stake in each company. We wanted a way to ensure the entrepreneurs would remain in North Omaha so we threw a clause into the contract stating the company must be headquartered in North Omaha for at least two years following the end of their residency year. We reasoned that we would need to have buy in and creative some sort of incentive structure. Drawing on the ideas of the behavioral economists we came up with what Jon named the Rent Substitute Savings Fund (RSSF), a fund that entrepreneurs would pay into but would be returned with successful completion of the program. The idea was simple, our entrepreneurs would pay “rent” which would be kept in an escrow account and returned as seed funds at the end of the year.
In exchange we would take a small equity stake in each company!
The goal was to be able to write $10,000 checks to each founder to use as seed funds for their startup. We figured this would keep entrepreneurs disciplined and focused and if they failed to be focused and disciplined that we under contract could not refund their rent — this all but ensured a positive outcome.
Neither Jon, nor myself really knew too much about how to actually do a startup. My only startup I’d done had failed within the first 3 months and Jon was a sociologist. We began researching entrepreneurship even more and realized just how big of a job it was going to be. We also had the disadvantage of approaching problems with too much of an academic slant. It was Fall of 2013 by now and it was just us two and we were both busy with our lives and struggling to see how to make something out of this idea given the large perceived barriers.
I settled into my new day job at a workers’ comp firm and started the economics graduate program at UNO while also working a side job as a sushi waiter at Blue. I barely had any time to devote to this new project, which was at the time unnamed. The time I did spend was spent discovering just how unoriginal my idea was. I learned about Homes for Hackers in Kansas City and about startup houses in the Bay Area. I also began to see advertisements for Silicon Valley, an HBO series about life in a startup house.
During this time, I pretty much hated my life. I had just finished undergrad and thought there was going to be a pot of gold at the other end of the graduation stage but instead I immediately began taking graduate classes. One of my first classes was research methods class, where again the teacher had us make a list of possible research topics. This time I decided to study something more pertinent to my immediate situation: I wanted to understand my labor market prospects with a masters in econ from UNO compared with one from UNL, Creighton, etc. I was conducting this study mostly to settle an argument with my friend, fellow economics major, and former roommate Jake who contended that his UNL econ degree was superior to my UNO degree. I also wanted to know about the labor market outcomes if I moved away from Omaha. Would I be sufficiently rewarded in the labor market? I ended up setting up a study with different treatments composed of different degree types and majors. I sent out fake resumes to employers and recorded ‘call backs’ and used this variable as a proxy for intent to hire. Long story short, I found out through my research (assuming my ‘call back’ proxy was legit) that the masters economics treatment in general was not being sufficiently rewarded in labor markets regardless of graduating institution. According to my research, you optimized as an econ grad with a bachelors or a Ph.D, but not with a masters. I dropped out the next week.
I’m not sure what made me think that I could do grad school, a day job, and 20 hours per week as a sushi waiter, but after I shed the grad school obligation I decided to focus next on getting myself out of my day job. Now that I had more time due to dropping grad school I was able to focus more energy into Year of the Startup. I learned about NMotion, Straight Shot and Dundee VC. Interestingly enough, I even worked with Mark Hasebroock’s son, Andrew, at Blue Sushi during this time.
I started reading books like Blue Ocean Strategy, Nudge, and Lean Startup. It was exhilarating to be able to reconcile this new information with my strong theoretical foundation. As an undergrad I was already reading common books for VC types and startup community organizers like Structure of Scientific Revolutions, Startup Communities, The Innovator’s Delimma, and Origin and Evolution of New Businesses. I devoured 3–4 audio books each week during a 2 month period that winter!
I had an idea and was getting prepped for it but I needed a better name. Until Mid December the project was known internally as ‘The Startup Belt.’ This name was problematic because when I was talking to a few friends about it they thought I was talking about some sort of automotive part! Inspiration for the name of Year of the Startup came while listening to an audio book. The following day at work, I put in my notice.
School’s Out Forever…
I don’t think my parents were very happy with my decisions to quit both things that would ensure that I would have a successful career. They both did their best to accept and support my decision.
January 15, 2014 (first day with no day job) is the unofficial birth of the company. It marked the first day that I woke up in the morning and my main focus was Year of the Startup — a streak that has been uninterrupted for nearly 750 consecutive days at this point.
I lucked out and was given a free office at No More Empty Pots’ building, which at the time was located just north of Creighton. Using that as a base I was able to white board my ideas and lock myself in the office until I came up with solutions. I met Adam Sagert who was working on a startup out of the building. He was very intelligent and ambitious so I invited him to be on our board of directors. Adam introduced me to Luke Armstrong of Cali Commons. Luke and I hit it off and I felt like he was a must have on the team. His partner Molly was frequently around when we’d meet and I really loved the dynamic of the two of them together plus she worked in marketing, so I asked Luke and Molly to join the board. I added an old college friend, D.O.D. economist, Blaine Remmick. Jon and myself rounded out the founding board.
Only Luke and Molly had been on any boards before. Luke and Molly were the founders of Cali Commons. Luke had built a few other companies solo in the past. Adam 1. Myself 1. Sure, we were far less experienced than other groups forming pre accelerators but we liked one another, worked well together, and were scrappy!
Pretty early on in the planning process, we recognized that if this were to succeed we’d need to have strong mentors to help out our startups. We knew that Jon and I, were too inexperienced to be responsible for mentoring founders. We built a list of 20–25 experienced subject matter experts who could assist us at a moment’s notice. We designed the format for a weekly meeting and update from the startups, we called this weekly meeting “State of the Startup” (SOTSU) and it would convene every Sunday at 7 pm. Sunday at 7 pm was the chosen time because it was the soonest I could get home from work at Blue Sushi.
We decided to organize as a nonprofit. We tried hiring a commission based development specialist but that fell through at the last minute and we were scrambling to figure out how this theoretical startup house might get paid for. We held one fundraising event in which we raised ~$800. I combined this with ~$3500 I had from my personal savings to make $4300. Total household expenses for the startup houses I had estimated at just under $20,000 for the year. Despite the $15,700 budget shortfall (which I’d have to pay out of pocket) I knew the show must go on and said,“Fuck it, we’re starting anyways.”
How To Do An MVP For A Startup House
I struggled with coming up with ways to do an mvp for the startup house idea. I knew that once I locked myself in to a lease that there was no turning back for a minimum of one year! I decided that I needed to test out elements beforehand. The mvp was a two-prong approach: get more experience working on startups and get more experience living with entrepreneurs.
To get more experience working on a startup team I spent ~3 months working with a very talented team on a productivity app called Prod that we together came up with. The team was composed of myself, Jonathan Rolfsen (I didn’t know it at the time but he was to be part of our first cohort), Ishmael Phillip (a phenomenal programmer who built the app for the movie Pitch Perfect 2), and Karen Scott (at the time she was an economist from MIT’s econ dept. and is currently an economist at The White House). Together we were building a productivity system based on behavioral economic insights and other emerging research. We worked on this app and agreed to pilot it with Year of the Startup’s initial cohort.
I also went on Craigslist and found one individual to be our first entrepreneurial guinea pig. I found a guy in his late 20’s named Ivon and I let him live in my bedroom at my apartment at the Orpheum while I moved out to the living room and slept at the office sometimes. Ivon did ~15 hours worth of work per week for me and I helped him try to develop a graphic design company, which was innovative because he would design the graphic in real time and in front of the customer.
Neither the productivity app nor living and working with Ivon went as smooth as I hoped but I was able to learn a lot about myself (what I lacked) and get a sense of what to expect when/if Year of the Startup actually ever got off the ground. At this point, even though I had quit my day job, I would’ve placed only a ~40% probability that we would ever actually make a startup house.
From April we pressed on and began the scramble to find a suitable property to use in North Omaha. Simultaneously, we began the applicant search. It was tough to find a suitable property. It was even more challenging to get applicants without already having a house.
While eating lunch at Cali Taco one day, I looked out the window and in the span of one minute I saw 12 different people from 12 different walks of life pass by. A feeling hit me, “Year of the Startup must locate as close to here as possible.” In a sudden shift, the idea became to locate a house in Midtown rather than North Omaha and to lose the clause stating that people must locate their companies in North Omaha. I argued that if we start more general then we’ll be able to move to the specific easier than if we were to start specific and attempt to move to the general which may be difficult if specific branding had already been achieved.
A House On Burt Street
It was May 2014 and the property search in Midtown was stagnant. Just when I thought we weren’t going to find any property, I see a promising Craigslist ad for a 4 bedroom rental just 3 houses down from a good friend. Better yet, the house was 2 blocks away from Cali Commons, where we held all board meetings.
I quickly made the call. A friendly lady named Angie answered and I told her about how I intended to use the house. To my utter disbelief, she tells me that her brother had considered creating a startup house a few years prior and was active in founding UNO’s CEO club. Taking this as a sign, I immediately told our board about the house and scheduled a time for everyone to view it. The 4 bedroom house wasn’t much (6 bedrooms depending on how you define ‘bedroom’) but we unanimously agreed that it would suffice.
The application period was winding down and it was time to make a decision about which entrepreneurs we would select. The board reached a decision, naming Eric Burns of VendorBids, Jonathan Rolfsen of CrossFlow Fitness, Scott Williams of Omaha Biofuels Coop, and Jason Minor of Hemplicity Box — in addition we added nonresidents,Brent of Big Muddy Urban Farms and Haris of Mindsent Expert to form the first cohort of startup fellows for our new creation, Year of the Startup.
Everything Is Set
I was scared as hell going in to summer. What if it didn’t work? What if I’m wrong about all of the assumptions this business is built on? What if I’m not good at managing people? What if I can’t afford to pay the entire rent here? A million what if’s and for good reason. In no uncertain terms, it was irresponsible and excessively risky to begin Year of the Startup in the fashion that I did.
Ultimately, I knew that I had a good degree to fall back on and could recover easily if everything failed. But wait…if this Year of the Startup idea was really the culmination of every good idea I’ve had in the past, I couldn’t just let myself off the hook so easily. I needed to put more on the line but at once remove the pressure. I recalled the idea of ‘Indifference Curves’ which I had remembered from Microeconomics class. The idea of an indifference curve is that you have a situation where you are indifferent about the outcome because each of the potential outcomes give equal satisfaction.
After thinking about it for a while, I realized that I could use this idea to create my own indifference curve situation by making a deal with myself that if Year of the Startup failed that I would move to Puerto Rico and live in the Carite Rain Forest where I had lived and learned organic agriculture some 3.5 years prior. This time I would move down there and learn new things like maybe physics or coding or natural building. Suddenly, by making this deal with myself it took away much of the pressure and anxiety about failing because I knew that I would either succeed at Year of the Startup and that would be great OR that if I failed at Year of the Startup that I would have something really exciting to look forward to in Puerto Rico.
We had failed to raise money so the plan was for me to just work a lot at Blue Sushi to pay for the house which had a rent of $1200 with another ~$400 in utilities. I had never paid over $550 for rent plus utilities before. I made plans to get a second waiter job at Roja in August so that I could work the~60 hours each week to make enough to pay rent and to live off of. If this sounds fucking nuts it’s because it was. It was the result of combining atrociously poor planning on my behalf with unfounded determination.
Just a couple weeks before the official kickoff of Year of the Startup and the move-in (09/04/14) I get invited to my good friends’ wedding in Milwaukee and travel there in my 1999 Chevy Lumina. I made a crucial mistake: I took a hoopty (an old, unreliable vehicle) on a road trip and it broke down…and I came back on the Megabus.
I finally get the keys to the startup house! Now I was supposed to convince these 6 early stage founders that despite being car-less and employed 60 hours per week as a waiter that I was capable of helping them achieve success in their startups. I also had to convince them that despite my tight finances, I would actually be able to return their rent payments on time and in full at the end of the year. Additionally, I’d have to do something that I’d failed to do up to that point: be a great roommate.
Down The Stretch
By some miracle, things basically worked out. Startups progressed. Every week our mentors came and did their thing, kicked knowledge, etc. What was the best part was the way that we became friends and helped one another with startup stuff and just with life in general. By December we had settled into our new lives at the startup house at 4036 Burt Street. We grew accustomed to talking about startups over meals, and waiting patiently for Scott from Omaha Biofuels to get out of the shower and for the hot water to be once again available, and we got used to coming together every Sunday evening at 7 pm for the weekly “State of the Startup” meeting.
In December I had a conversation with one of our entrepreneurs where I told him that if he didn’t stay at the startup house more frequently (he liked to stay at his girlfriend’s house) that I was going to rent his room out on Airbnb. He said he understood and decided that renting out his room would be for the best. This marked the first major breakthrough for Year of the Startup!
Myself and the girl I was dating at the time spent 3 weeks channeling our inner Martha Stewart’s to properly decorate the room at the startup house to attract Airbnb business. I had run Airbnb on my previous apartment so luckily I had some familiarity with the process.
It was an immediate hit! We got an awesome first Airbnb guest, Mario. He was the general manager of the Pita Pit in Wichita and they were sending him to Omaha to clean up this mess, which made the news.
We met some cool guests from all over the world. One unintended consequence of using Airbnb was that we had to keep the house cleaner and couldn’t be loud at night which disciplined us all and kept us more productive.
One month after starting Airbnb, I looked at the bank account to find that we had made more than $800 in just one month off of one bedroom. The total costs in the house were ~$1600 so this was huge because if this Airbnb revenue stream held steady it meant that I could now work half as much at the restaurants and focus more on building Year of the Startup!
Spare Room In The Basement
About the same time that I was cutting back at the restaurants, I meet Jason Feldman. He was mentoring one of our entrepreneurs who was working on a subscription box service for hemp product, Hemplicity Box. Jason was with the Hemp Industries Association was something of a “go-to guy” in the state for industrial hemp questions.
Jason was looking to move from Lincoln to Omaha and asked about renting our Airbnb room. I told him he could rent our spare room in the basement at the startup house or do ~15 hours of work per week for Year of the Startup in exchange for the room. Jason chose to do some part time work for Year of the Startup and that 15 hours per week.
The First Break: Nightlife Transit
At a Modeshift Omaha meeting, Eric Burns came up with the idea for Nightlife Transit. It was to be a late night circulator shuttle that would operate on a bus-like schedule on weekend nights and it would provide service to the entertainment districts of downtown, midtown, Blackstone, Dundee, and Benson. It was an instant hit! The media was all over it! Eric Burns was able to partner with his roommate and our entrepreneur, Scott, from Omaha Biofuels, to fuel the shuttle. Omaha Biofuels was collecting waste vegetable oil from bars and restaurants and then selling it to Nightlife Transit who would in theory shuttle those same customers back to that bar on fuel derived from their previous meal at that bar! It was during this time (Feb-May) that things really came together at Year of the Startup and the culture that remains to this day was established. The capstone was Eric of Nightlife Transit successfully winning the ‘Get Started Omaha Business Pitch Competition’— for this he was awarded an over sized check for $8500 and was featured in Inc. magazine!
Flintstones Meet The Jetsons
In Fall 2014, I initially reached out to Ben Barreth, who is the founder of Homes for Hackers, a startup house in the Kansas City Startup Village. We had discussed having our entrepreneurs come for a weekend visit at the his startup house in KC. Berkshire Hathaway weekend was looking like the perfect time. We had the entrepreneurs clean up their rooms (which was especially difficult for Eric of Nightlife Transit) and rented out every room in the startup house for ~$125/night which financed our trip down to KC for the weekend!
While in the KCSV we got a great sense of what a vibrant, dense startup community looks like. After touring the village, I knew we would have to start one in Omaha!
Saving The Program
As the year wore on and May set in to full bloom, I knew we must do something to improve our financial position so that we could grow. Even though Airbnb was working out and we were getting continuous bookings, including a student in town for Interface Web School, who stayed with us 2.5 months, I was on the brink of burnout — from still working ~40 hours peer week at a restaurant.
The easiest and quickest solution would be to just run more Airbnb rooms. To do that we needed more houses. More houses solved the capacity and revenue issues in one fell swoop. If we were able to maintain a 1:1 ratio of Airbnb room to entrepreneur room, I knew that we could continue letting founders live free in our startup house and expand at will. Only problem was that it is expensive to get new houses and our req’s. called for 6+ bedroom houses which are hard to come by. Luckily, the property manager for our first startup house owned a 7 bedroom house in the Little Italy Neighborhood that he wanted us to turn into a startup house in exchange for helping him with his property management duties, as he spent most of his time in Tampa.
As with most deals, the work for startup house arrangement fell through and we were back to square one. This was the lowest day for morale.
While taking a walk, I noticed the house across the street from our startup house was being renovated. I popped in to see if it was big enough and if it was available. Lucky moment #2 happened here as I was told the 6 bedroom house would be available soon and that the owner was a young guy who owned several properties in the neighborhood.
A few months earlier in March, my mom graciously loaned me $ so that I could purchase a car. I hadn’t purchased a vehicle yet because I was searching for the best value and was trying to find something for under $5000 that I could use to drive for Uber. I had been without a vehicle and run Year of the Startup for 6 months at this point without a car so there was no rush to make a decision on a car.
Then I saw an opening — with the money my mom had loaned me for a car, I reasoned that I could apply that to leasing a new house and then run Airbnb’s to make some quick $ and then get a car and pay my mom back by summer’s end.
I get a surprise call from the owner of our house saying that he’ll purchase the house in Little Italy if we agree to rent it from him and use it as a startup house! I wanted the house…really bad, though I knew that we couldn’t afford it and we really couldn’t even afford the one house across the street from the initial startup house. Funds were meager, morale was getting to be low among Jason and myself. A couple board members had just left. One moved. My original co-founder, Jon, had just told me that he wanted to focus on other pursuits but still would like to stay in the loop (the startup equivalent of “let’s be friends”). To make matters worse, the entrepreneurs in the program were feeling the decline. All of our entrepreneurs would participate in a weekly survey and one of the questions asked for feedback on the program, one gloomy response read, “house has really lost momentum” — my heart sank.
What Do You Do When You Can’t Afford One House?
Apparently, you get two more and you get those two new houses on the same day AND you furnish both in 8 hours before your Airbnb guests arrive for College World Series. This seems like an extremely irresponsible move but I had become very adept at smoke testing at that point. After all, we had helped take Nightlife Transit, a transportation company, from literally an idea on a napkin to revenue generating and featured in Inc. in just a few short months. De-risk had become a staple in my vocabulary.
It was late May and I had to decide whether or not to sign one or both of the leases to expand our capacity. I had 3 days to decide.
I went down to my family’s house in Olathe, KS for the weekend to mull over the decision.
I knew that College World Series was coming up and that with seasonal pricing we could really stabilize the program with Airbnb revenues. I estimated that we could in 3 months in the summer earn enough money to pay for 9 months of housing expenses. According to my calculations, I needed to bring in $7,000 in the first month to prevent us from going belly up (if we decided to get both houses).
There was one issue. I couldn’t list any property on Airbnb yet because a.) they weren’t furnished, b.) one was being remodeled, and c.) one still had other people living in it.
I didn’t want to commit to a lease until I was certain about how much we would make. I did the only thing I could. I went online and I found pictures of bedrooms that I knew I could recreate the look of and I used those pictures for my Airbnb listings that I made for the property that I did not yet have and I waited to see if we would get booking requests!
Miraculously, the pre-sale worked! Yielding ~$6,00o in reservation requests in just 3 days!
The decision was easy to make in the light of this new information and on the same day we got 2 new houses: six and seven bedrooms, respectively. This new expansion energized the team and saved the program. It couldn’t have been done without my mom generously loaning me money and this Airbnb bet paying off.
Winding Down Year 1
The rest of the summer was busy running Airbnb rooms at the two new houses. We even put up 2 tents on Airbnb (which were surprisingly popular) and it was written about by OWH even.
The highlight of the summer was being notified about winning the SBA’s Accelerator Prize, a $50,000 capital infusion that gave us a new lease on life. With it, we were guaranteed another year of existence and that the company would live to die another day.
The Good, Bad, And The Really Ugly
There you have it! This is the mostly full account of how Year of the Startup was born and a brief account of the first year of operations. I left out some of the victories esp. if they were things that went according to plan (boring). I’m leaving out successes like all of the positive press we received, or Chuck Hassebrook being an Airbnb guest, or Big Muddy Farm taking a page from our book and developing a residency program in the neighborhood, or Omaha Biofuels landing a sweet contract with MCC, or YOTSU participating in a startup accelerator, Venture School, ourselves during the year. I left out the funny or ‘feel good’ stories like the time the house as a whole and an Airbnb guest created a startup called katboxx.co, or Jonathan making Eric’s Tinder date do pullups, or getting to become good friends with Julie, our Airbnb guest for 2.5 months in town for Interface Web School, or any of the stories that you’ll read in my next blog post, “YOLO Moments: Year of the Startup.” I’m also leaving out bad parts like the poorly executed demo day event (my fault), or the falling out that happened in KC or the wifi being shut off for a few days because I couldn’t afford it. I also didn’t spend too much time discussing the team around me but know that this was a team effort and couldn’t have been done without everyone who was involved. Jon was crucial, being my original co-founder, none of this exists without him. Adam believed before anyone else. Luke and Molly from Cali Commons opened their space up and added credibility when there was none. Jason’s commitment has been unbelievable and bringing him on board was the best thing that could have happened; to this day there has never been anyone to believe in this as much as Jason does.
I wanted to tell this story to give an honest account of all the thought, luck, misfortune, stupidity, blood, money, sweat, and tears that went in to making Year of the Startup ever happen. I hope that by telling this story people can learn from the mistakes and realize that the sausage making process for a startup is rarely pretty, always inexact, and often questionable. Much of being successful at a startup is what Paul Graham calls learning “How Not To Die.” Determination and not dying appear to be the most important factors in launching successful ventures. Even if you’re stupid, naive, inexperienced, generally unqualified and a hard head (as I was and probably still am) you can make up for these things and stay alive if you’re passionate and obsessive about your startup!