Founders Dilemma: The Key to the House?

Founders' Dilemma 

With our business plan, there are two major dilemmas that I foresee us to face in the housing and fintech space.  

1.  High Capital Need Before Product Market Fit

Our twelve month product and company roadmap projects about three to six months of self-financing and family and friends, focusing on building a MVP, customer interviews, and rolling out the product.  Depending on the total amount we can self-finance (let's say, $50k), the platform as a service (PaaS) will have a burn rate that could potentially require us to find an Angel before we've found product market fit.  More importantly, if we decide to test the marketplace lending model within the fintech + real estate product, we're going to need some significant capital (estimates will be posted).  I'm positive that family and friends will not be able to finance Cash on the House north of $500,000.

This is a classic tech startup dilemma.  So what's the plan? 

• Bootstrap this summer by using the resources at Harvard University and keep the burn rate (office space, tech, salaries, etc) as low as possible.  We're students, afterall.  

• Line-up three strategic partnerships from the MVP and test the customer stories and personas as quickly as possible.  

• Eat tons of ramen.  

2.  Technical Talent

Brandon and I are both adept at the technology, but neither of us are the engineers to write the code.  We are not hell-bent about giving up control in order to find technical talent, but this is our biggest strategic vulnerability if we do not find a talented developer to help us launch Cash on the House.  We've thought through three scenarios, and there are advantages and disadvantages to each part:

• Find a technical co-founder in Boston who's excited about Cash on the House.  We clearly prefer this option, though it's hard to find, especially in Boston.

• Hire a developer through a referral.  Yes, it will kill us on the burn rate.  Yes, it will kill us if the requirements are not set.  But it's the next best alternative.

• Use open source software to piece together a MVP in the next six weeks, and then fall back to option #1 or #2.   

Till next week, where we touch on the business type details and testing plan!

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The Founders Story (Rajan)

When I led Business Development and Analytics for M-Changa, a mobile payments and crowdfunding fintech startup in East Africa, I worked with the Gates Foundation to understand if we could analyze giving patterns to surmise credit worthiness.  For example, if I'm a village elder ("donor")  in Kenya and I've used a crowdfunding platform to support a younger community member in a time of need (wedding, funeral, healthcare cost, etc), can we understand from this transactional data that the "donor" is indeed the village elder with higher social status?  The answer is...it's really really hard, but it's absolutely possible.  But this research opened my eyes to the world of using non-traditional data in alternative lending.

After escaping to graduate school after leaving M-Changa, I met Brandon, current student at Harvard and Wharton, who had extra cash when he was a banker and invested into a duplex house in Los Angeles.  Realizing that the millennials out there needed more opportunities to invest, and real estate is a market that is ripe for innovation, Cash on the House was born to provide opportunity to the Brandon's of the world to invest in real estate.  

Lifting Weights...Fintech Style

Jeff Bussgang, venture capitalist at FlyBridge Capital and Professor at Harvard Business School, started his Launching Technology Ventures class in January telling us that we were able to publish our final projects on the blog.  Why?  To build our blogging muscle.

Yes, each character I write is my own version of lifting weights at the gym.  Trust me, I'll never share that story on a Friday night at a local watering hole, but this blog is about building a habit to communicate about a venture called Cash on the House for Carl Byer's class Entrepreneurial Finance.

For the next six weeks, I'll blog about planning for a theoretical venture so that I can learn finance from an entrepreneurs perspective.  Thanks for joining the journey!