Reasons I Won’t Fund You

There are, but the people that like to bootstrap slowly growing companies that are profitable along the way are usually more wary of handing over power and shares into the hands of an investor.

As an investor, I would prefer people that flock towards me and hand over their power with flying colors in return for some money.

I read this that he meant that you didn't at least meet the intro, not that you had to employ them.

Twitter had plenty of competition. All existing social media was competition for Twitter. Email was competition for Twitter.

Competition isn't about some other founder doing the same thing you're doing. It's about all the ways people can already do the things you're trying to sell them.

There are plenty of companies trying to grow slowly, via organic growth. Or even not grow at all (think about a restaurant - usually no growth is intended). There are even plenty of tech companies in that bucket.

However, VCs generally don't invest in these companies, for a variety of reasons. The bottom-line is that it doesn't make sense financially for the VC model, and it's not what the people who give the VCs money want.

VCs will often get money from pension funds, etc. These are companies managing billions of dollars, of which they allocate let's say 1% to VCs, with the idea of making a huge interest on their investments. E.g. typical real-estate or stock investments will give you a %5-%20 interest, and VCs are supposed to give you much higher numbers.

Again, this doesn't mean that there aren't plenty of tech companies out there who aren't looking for VC money or to grow rapidly, although there are structural reasons why lots of tech companies should look for that kind of growth (mostly, tech companies have way more ability to scale than e.g. restaurants). But most of these "smaller" companies are simply less visible - for obvious reasons, bigger companies are more visible, therefore more talked about.

BTW, let me just correct one misstatement - VCs are aiming for huge exits, but they are investing for often long time horizons - I think the typical time to an "exit" is 11 years these days, so it's not like they're trying to do a quick exit - quite the opposite, if a company exits after 3 years, it's almost certain they haven't become a unicorn.

Edit: Still one of the best pieces of writing on the idea of "2 kinds of companies", from Joel Spolsky: https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

Sure, but that money is rarely enough.

Investors take on high risk when investing in a startup, but that risk is localized. They typically have a diversified portfolio so that the successes outweigh the failures. As a result their local risk tolerance can be high.

Founders, on the other hand, are typically investing their time, energy, etc., mostly in their company. Their risk isn't localized, so they can't have as high of risk tolerance. As such, they need a higher EV in order to justify an equivalent probability of failure.

Giving up power lowers your EV. In the event of an exit, people with power get paid.

As such, founders should be looking for investors who are collaborators. The investor you're describing should be avoided at all costs, because they're just looking for patsies to take on unreasonable risk for their own gain.

The collaborative model isn't bad for investors--it doesn't have as high of reward if it succeeds, but there's also lower risk because being involved in a company gives you a better idea of when to invest more or pull out.

But this model isn't popular with investors because it takes more work.