This is the P&L; for Diaspora, a project which raised two hundred thousand dollars on Kickstarter (http://goo.gl/Yf3Pi) and has now decided to turn it over “to the community” (http://goo.gl/yH9W9) (read; all the money has gone, they’ve not managed to create any revenue streams, and they’re not putting any money in to keep it going).
Looking over the figures a couple of things jump out at me;
The only income is the Kickstarter money. This means that there was no separate investment made by the founders which is never a good sign. You should always ask the question “If the founders haven’t made an investment why should I?”
Nearly 70% of the money went on “people” expenses. Ranging from four salaries of 28.8K, “Housing allowances” of nearly 10K, to over 3K in “airfares”. This just doesn’t make sense. The founders of most start-ups work for nothing. They take on consultancy jobs or work on the side to build up cash to support their idea, they shouldn’t take out salaries and fly around on other peoples money.
I’ve been involved in starting-up three companies, been a low-number employee on a few more, and a contractor for even more than that, and I’ve yet to see a successful start-up where the founders haven’t invested and people expenses weren’t kept to a minimum.
Those companies have followed a range of paths, a few went to the dead-pool, some are being managed to stay small because that’s all the founders want, some are still growing, and some have exited 7 figure acquisitions, none of them have burnt through other peoples cash and then “handed it over to the community”.
I hope that any future investors who see “involvement in diaspora” on a CV think long and hard about investing, because to me these guys have shown that they’re in it for the cash and when they can’t get any more out of it they’ll move on pretty quickly.
[and no, I didn’t invest in it, for which I am grateful]