31–40 of 46 posts
One thing to not underestimate is that owners of lifestyle businesses, unlike their VC-funded counterparts, often really aren't that interested in getting press features - in fact, many will actively want to avoid it, as press features just increase the likelihood of someone wanting to emulate / imitate your success by competing with you.
Who would buy something promising that you too could be "Joe Business Owner" that no one has heard of before.
Unpopular opinion: if your company is going to succeed, why do you need VC? Sure, (nearly) every really really big company pulled VC at some point, but this is an industry full of survivor bias - and VC's know full well that almost all their punts are going to fail. VC is, arguably, the most expensive money you will ever borrow. If you could borrow a couple of hundred K against, say, obscene house prices in San Franc…
There is a very good distinction here. Small business implies that your business is one that HAS to make money. Sure, it's not a lot. It may be a side job. But it is a business that has an actual plan from day one to make money.
Small businesses are still the backbone of the U.S. and make up for the majority of all employment. Most of them don't raise "VC" money, many of them start with a loan, or the wonderful "friends and family" money. When they fail, it is bad. Friends and family may stop talking, property may be repossessed by the bank, etc. The founders who take VC money are usually young and in tech. The risk they take is nothing compared to the people I stated above. It's actually hilarious how out of touch the SV "start up" world is with how most businesses are created. I'd even say that this is a large reason why the failure rate of companies with VC money is so high, it's mostly tech, mostly young people who can fail and be standing on their feet regardless, and these kids have never had to make ends meet in respect to running a business.
Of course, there is a place for VC money and the type of companies that are created from taking that money. Many businesses would be far too risky to put your house/family/entire life on the line if it fails. However, I see so many companies that took VC money, moved to SF, hired a bunch of extremely high paid employees, thus have to provide crazy benefits, and their burn rate is now under a year... and they haven't made a single dollar yet!! Insane.
With the same amount of money they raised, I can start up in Texas, Atlanta, Chicago, Denver, etc, hire as I need, have an office with a much lower cost, and increase my run to several years, if not more. The advantages you get from being in SF are easily wiped out when you give a company 2-3+ years to succeed, rather than 6 months - 1 year in SF.
Another thing I've seen is that these small businesses are usually started with the people that actually have expertise in the field they are in or are more likely trying to solve a problem they themselves have. I think that is important for a founder/s. Many founders in the SV world have no clue about what they are doing. They simply have tools (tech), and are looking to put it into whatever they brainstorm. Much of the time, they do not understand the problems they are trying to solve, or are solving problems they aren't important. Another reason for the high rate of failure with companies that take VC money.
That's exactly what we're doing. The problem is, those aren't generally exciting stories to print. "Ex-google 20 year old founder raises $73 million Series A to build Uber for Cats" would raise eyebrows and gain clicks. [1] https://www.recapped.io
Assembling a team is tougher for a lifestyle business. A startup lottery ticket is more desirable. "Build this with me so we might get rich" is better than "build this with me so we might pay ourselves large salaries". Then you've got the current funding climate that absolutely loves companies that look like lifestyle businesses. The temptation to take money is going to be huge. Also - a failed VC-backed startup look…
Can you elaborate on this? I do keep some track of the startup world (since I consult to them) but was not aware of this point.
>Also - a failed VC-backed startup looks better resume-wise.
Why? Genuine question. Why would a failed small business not look as good?
Unpopular opinion: if your company is going to succeed, why do you need VC? Sure, (nearly) every really really big company pulled VC at some point, but this is an industry full of survivor bias - and VC's know full well that almost all their punts are going to fail. VC is, arguably, the most expensive money you will ever borrow. If you could borrow a couple of hundred K against, say, obscene house prices in San Franc…
Businesses that are innovative and will deliver higher ROI are on average more likely to require capital, which becomes a barrier to entry.
The market is much more efficient for ideas that don't require capital injection, and you're therefore playing a much harder game. It's also harder (though not impossible) to make such a business return time-adjusted compensation in excess of what you would make in a job.
There's also the risk. In order to jump ship to work on a bootstrapped company, you would almost certainly need a combination of savings and revenue streams that will sustain you long enough to make the business viable, which could take years. The combined costs of food, housing, medical, and potentially a family are often prohibitive. Taking a VC-backed salary may be the only way to safely attempt working on your business.
Alternatively, you would need to find enough time to make a side hustle viable. Not impossible but, speaking from experience, extremely difficult to manage properly.