You do not need to try it. It will not help your credit to take on more debt. It is a very bad idea to take out a personal loan to pay back a company debt. Why everyone on this thread isn't yelling this at you in all-caps is a mystery to me.
Go to a local credit union instead of a big bank. You can probably also use your car or other assets as loan collateral. I'm sorry to hear you're going through this. The best of luck to you.
Corporate. Incorporated in Delaware. Thank goodness.
I'll try to see if they're good with the payment. I'm just not... like that, though. I'm not one of those guys that can call up Rackspace and be like, hey, if you go into collections, you won't get shit, so we're doing it my way. You know?
Lots of time passed before I came to my senses.
Thank you for your help, Jacques. You know me, and I'm thankful that you're imparting your advice.
Now's the time to start. But yeah, you don't say "we're doing it my way." It probably sounds more like, I'm broke, I want to pay you back, what can we do to help me make it happen?
> I'm not one of those guys that can call up Rackspace and be like, hey, if you go into collections, you won't get shit, so we're doing it my way.
Trouble is the time you learn the most, this is also a part of doing business, over the years I've had a few occasions to have to bring 'bad news' (in some cases very bad), you will have to bite the bullet on that one.
> Lots of time passed before I came to my senses.
Hope is sometimes a dangerous thing.
> You know me
Drop me a line, maybe I can do something a bit more concrete.
a) Yes, and I'm dealing with a startup lawyer, at a very well-known Silicon Valley law firm (this is when we had money). He's been very very patient with our lack of being able to pay the retainer.
b) Through the corporation. It's registered under the Inc and has the EIN associated with it. However, it also has my SSN associated as the primary contact.
c) Well, I have a feeling that most of our credit card transactions are fraudulent, being in the space we are in. (For example, someone charged $12k on a card and tried to cash out to PayPal.)
I'll call up Rackspace and give it a shot. Thank you.
The last startup I was involved in, the guy who was running it talked to the lawyers and got them to waive a good chunk of the retainer fees when it sank
That's what I would expect here as well. Lawers are - if anything - pretty realistic about plucking feathers from frogs, and they'll be happy enough to see something rather than nothing at all. After all, they might be your preferred contact the next time you strike out and perhaps succeed.
That's good to hear. I'd like to pay this lawyer in full for his services (retainer minus un-used retainer balance). I don't like screwing people over, even if they're expecting it to be a percentage of their clients that do that. I don't want to be in that percentage.
Let me correct a misconception here, you are not screwing people over, customers having payment issues is a risk of doing business, they all decided just how much debt they let you get in to.
If you had set out to create this situation on purpose that would be screwing people over, now all that there is left to do is to shut down as orderly as you can and to have everybody absorb an appropriate part of the loss.
To take that further. Don't be that percentage by not acting like them. Don't hide or promise things you can't deliver. You go to them. Lay it out and work something out.
Everyone takes risks doing people. Inability to pay is one. Bad people is another. The first is usually rarer and more manageable. The second is not so bad. You can avoid being in the second category.
*Mixergy interviewed a bankrupcy lawyer a while ago. Maybe there's something useful for you in it. One useful thing I remembered: Discounted debt is usually taxable. Be careful you are not caught off guard. http://mixergy.com/russell-demott-interview/
Thank you very much. What's more is that I'm quite well known on Hacker News—not as much as patio11 to have an article written about him, but enough that a good amount of people I meet that read Hacker News say that they know me.
Which makes it more stinging and 500% more embarrassing. But that makes it all the more interesting, huh?
It's interesting. I licensed my technology as an SP to be used with this company, so all of the IP is mostly, well, mine. I have thought about it, but haven't reached a decision.
Don't be embarrassed. It happens; especially in this kind of economy. Unless the failure was due to gross negligence on your part, no one who matters will hold it against you.
Do you remember how the founders of TipJoy and, more recently, NewsTilt were viciously shredded by an angry mob, right here on HN? No? Because failure is nothing to feel bad about unless it becomes a predictable occurrence.
When you've got your breath back and blood pressure is approaching normal, consider opening up about it. While you may not be able to talk about all of it for legal reasons (eg it seems like your partner was rather dubious), sharing what you have learned from the experience, what red flags you saw but why they didn't seem worth stopping for etc. is valuable to many people. I'm easily embarrassed myself, so I know it's difficult; but don't fall into the trap of anticipating only the negative possibilities, and cutting yourself off from the sympathy and support of people who like you.
Now, I don't mean 'Tell HN: OK it was me ohgodImsorry'; you don't need to humiliate yourself! Take a long bath/walk on the beach/whatever, and let go of the situation for a few hours. You poured your own money into it in an attempt to keep things under control, and it was just just bigger than you were. What happens next is in the hands of others, and you can influence but not control it. Then write your creditors, mostly the same letter, and tell them what you told us - you owe this much to these different people, you have lost a bunch of your own money, [EDIT: I misinterpreted the stuff about your co-founder, as if the person had bailed on you.], and you're sorry. Express your willingness to pay it back ASAP, but stress that you wish to do it on a pro rata basis. Of course every creditor would like to be paid first ahead of the others, but making the same information available to all indicates you have nothing to hide and is more reassuring than a non-credible promise to put someone first. If you can afford it, a small check to each, even $25 or something, speaks volumes.You might want to write to the IRS and the city or county that issues your business license too - if you're not sure what to tell them, call and ask what your obligations are. You may be surprised how helpful they can be. you can call them today and get the letters out before you go to bed (go buy some stamps if you need an excuse to get up and walk around). Then, sleep the sleep of the just. Get up tomorrow, eat a healthy breakfast, and start composing your 'How I lost a kajillion dollars and what I learned as my business followed it off a cliff' post , on your existing blog, Posterous, wherever. Throw in a couple of ironically entertaining pictures. It's not a funeral notice because you're not dead - you are now a man or woman of experience, and that experience has a value. Get that up over the weekend, realize people still like you, and on Monday you get back to work.
Your job for the next week is to contact the creditors again, ensure they all have the same information, and politely but firmly stick with the pro-rata approach. Whether they agree or no, ask for their decision in writing so you can send copies to the other creditors. By the way, since it sounds like you're not in debt on your personal accounts, consider dropping by your own bank and asking a manager for advice - since they won't actually be trying to collect from you, they may be more forthcoming about how they evaluate situations like that, and heaven knows they've had plenty of experience lately. Allocate 50% of your time to debt service, and the other 50% to making some new money. That can include chasing consulting/programming work, but your existing business still has value. Call business magazines like Inc. people like Andrew Warner etc., and say you have an interesting story - use your war story post and the feedback you received on it as your raw material. Hell, call Techcrunch, because they can't milk that SuperAngel scandal forever so you might as well work the publicity angle and give them an interview. 'Life after death' is a perennial story and even success junkies need one every so often. How about your startup's business model? Your actual business may have failed, but that doesn't mean the idea itself is without merit. Can you sell the IP, or the brand, or the analytics, or the customer list, or the suspicious transactions list? Some of these may be worth money, some not, but all that information has value in some form. Just pretend you inherited it from Uncle Debtscrewed and find that value. Can you make some value out of the domain? Can you write a book?
Yes. You can do all of that, and more. Because although we all laugh when a clown steps on a banana peel and falls flat on his face, what we applaud is that he gets up again afterwards. So you don't have time to brood; you launch next Monday.
> Do you remember how the founders of [...] NewsTilt were viciously shredded by an angry mob, right here on HN? No?
Well, actually this happened. It was tempered by lots of people being nice, offering condolences, giving good insights, a few job offers, and even some people looking to start up companies together, but lets not pretend the mob didn't come out with their tar and feathers.
That said, I fully agree with the sentiment. Failure is perfectly acceptable, a natural occurrence in a risk-taking industry.
It's a C-Corp. (Edited: made an error and said S-Corp earlier) I'm not 100% familiar with bankruptcy, but I'm assuming it'd damage my name as well as my co-founder's, as well as going into stuff I don't want to get into (court, etc.)
I don't understand. You're in USA? It is supposed that you can fail in USA. That's capitalism!. Why do you want to pay those debts? Your company is bankrupt and it has to be declared bankrupt then go into liquidation in order creditors recover their money. Those are the rules of this game.
If it's an S-Corp then you are protected personally - you don't necessarily need to file bankruptcy but I also wouldn't pour anymore of your money into it if it is jeopardizing your personal finances. Talk to the vendors, explain the situation and then talk to your co-founder and come up with a plan to pay it off through the company (consulting, selling assets, etc)
You are protected under a C-Corp, unless they can pierce the corporate veil in court (unlikely if you didn't do anything you weren't supposed to do) you can walk away and the only assets any of the creditors can go after are those of the company. All of your personal assets are free and clear.
You should edit your post if you can to mention that its a C-Corp. From what I know the C-Corp should be protecting you from personal liability, but I'm sure other commenters here have more expertise
Just for reference: The C-Corp does provide a pretty heavy liability shield. However, alot of these contracts where likely personally guaranteed. It's nearly impossible to open a merchant account for a young company without personal guarantees from the principles. The lawyer likely required personal guarantees on the retainer as well.
It's part of doing business really. Creditors really don't like corporate protection (for obvious reasons) so it's pretty easy to get yourself into a situation that they're seeing... although the high number of charge-backs is something of a head scratcher.
Thank you for your suggestion. The only reason I wouldn't do that is because Rackspace was very adamant about even the extension of the deadline (they would only agree to a 5-day extension). But it doesn't hurt to ask, though it may create a strained relationship between us.
It's their job to try and collect as much as they can. Even if your contact is friendly and sympathetic, if they think you can pay on better terms than you offer they will hammer you. On the flip side it is your job to be honest about your situation and get them to accept terms that you can actually meet. Other people have given better and more specific advice but the bottom line is they will take what they can get. No hard feelings. Business is business.
I worked as a collector at one point. You have incentives to get money collected. A collector will say everything they can to get you to pay (sometimes skirting the collection laws).
They know that you have a limited amount of money and the chance you actually paying decreases as time goes by.
