The Big Lie of Venture Capital • Hacker News Board

Re: The Big Lie of Venture Capital

#21

Post by asdfman123 » Mon, May 07, 2018, 9:57 PM UTC

whoisjuan wrote: post #18

This reads like a rant out of frustration for not being able to raise money (and newsflash, if raising money is hard, no doubt raising in Montreal is near to impossible), but I think the author nailed it with this paragraph: "The problem, with the Big Lie, is that it kills a lot of startups that end up building their strategy around a capital infusion that will never come, and end-up wasting a lot of time trying to f…

This is just another article that causes me to kick myself. I graduated from Stanford in 2010 but now am a pretty average, non-Silicon Valley programmer because I didn't want to do anything after graduating from college.

Re: The Big Lie of Venture Capital

#22

Post by jv22222 » Mon, May 07, 2018, 9:58 PM UTC

tptacek wrote: post #6

I got through this whole thing and I still can't figure out what "the big lie" is. That it's hard to get funded as a first-time founder? No shit. In the post-YC era it seems pretty close to impossible to close a round with a professional VC firm without first having done some kind of syndicated, social-proof-collecting round of angel investors --- so if that's seriously what you were playing with doing, I automatical…

Re the lie. Maybe he means something like this?

https://blog.nugget.one/upstart/entreporn-the-fallacy-that-w...

Re: The Big Lie of Venture Capital

#23

Post by jdoliner » Mon, May 07, 2018, 10:01 PM UTC

tptacek wrote: post #6

I got through this whole thing and I still can't figure out what "the big lie" is. That it's hard to get funded as a first-time founder? No shit. In the post-YC era it seems pretty close to impossible to close a round with a professional VC firm without first having done some kind of syndicated, social-proof-collecting round of angel investors --- so if that's seriously what you were playing with doing, I automatical…

My thoughts exactly, and the article even acknowledges this up front: only 0.91% of start-ups end up raising from angel investors and only 0.05% from venture capital firms. The only lie here is the lie our every member of our generation tells themselves ad nauseam: I am the exception, it doesn't matter that the stats say only .91% of startups ever raise anything, I am a member of the .91%, because I am the exception. (And if I prove not to be the exception it proves someone is prejudiced against me.)

Re: The Big Lie of Venture Capital

#24

Post by jdoliner » Mon, May 07, 2018, 10:02 PM UTC

asdfman123 wrote: post #21

whoisjuan wrote: post #18

This reads like a rant out of frustration for not being able to raise money (and newsflash, if raising money is hard, no doubt raising in Montreal is near to impossible), but I think the author nailed it with this paragraph: "The problem, with the Big Lie, is that it kills a lot of startups that end up building their strategy around a capital infusion that will never come, and end-up wasting a lot of time trying to f…

This is just another article that causes me to kick myself. I graduated from Stanford in 2010 but now am a pretty average, non-Silicon Valley programmer because I didn't want to do anything after graduating from college.

Why does this make you kick yourself? This is a guy writing an internet rant about how frustrated he is with the life you choose not to live.

Re: The Big Lie of Venture Capital

#25

Post by bootstrapping » Mon, May 07, 2018, 10:07 PM UTC

whoisjuan wrote: post #18

This reads like a rant out of frustration for not being able to raise money (and newsflash, if raising money is hard, no doubt raising in Montreal is near to impossible), but I think the author nailed it with this paragraph: "The problem, with the Big Lie, is that it kills a lot of startups that end up building their strategy around a capital infusion that will never come, and end-up wasting a lot of time trying to f…

> bootstrapping success stories often remain unknown

Bingo. I don't even want to be noticed (hence this throwaway account).

My startup has taken over an entire national B2B SaaS market segment but our major competitor hasn't realised yet. They deal in many segments and are a classic incumbent dinosaur, and were recently acquired so their attention is elsewhere. We've done no marketing, never been mentioned in any press, raised no capital. All growth purely by referrals. The more market share we can collect before the dinosaur notices I kicked its tail, the better. We're 100% bootstrapped, debt and dilution free and planning to stay that way, and to remain submarine as long as possible. As a result I'm entirely focused on serving our customers and improving the platform and our organisation to suit them, not running around wasting founder energy chasing investors and trying to dress up the company to look pretty for VCs.

Re: The Big Lie of Venture Capital

#26

Post by kyaghmour » Mon, May 07, 2018, 10:07 PM UTC

This article misses the fact that the "startup ecosystem" is different on the east coast vs. the west coast. And it's especially brutal when you compare the funding sources available to Canadian startups vs. US startups. See 2016 Analysis of 20,000 startups by Vancouver-based Yaletown Partners (here: www.yaletown.com/wp-content/uploads/2016/06/Canadas_Technology_Investment_Gap_Yaletown2016.pdf): “In 2015, U.S. companies raised three times as much on average compared to Canadian companies.”

Just like the author, I tried to raise money from Montreal and Toronto VCs ~10 years ago after having received substantial angel funding (~1.5M CAD). Contrary to what's asserted in the article, previous access to such funding didn't help us much. Albeit this was around the financial crisis, but still, there was no additional openness to listen to us. In fact it felt like a handicap. They wanted to see real sales, conversion ratios, etc. ... pencil-pushing sort of data in general. But I digress.

The more substantial issue that I found is that most VCs in Montreal/Toronto are extremely conservative. After we closed the startup I mentioned earlier I started travelling more actively. That was round 2010 where everyone was going to become a gazillionaire with a new "app". I was at a conference on the west coast and I stumbled on a startup that had raised 10M$ for an app. When I asked about their business model the answer was: "We're focusing on acquiring users for now. We'll figure out monetization later." THAT would never fly for raising capital in Montreal/Toronto. In fact I was recently talking to one of the VCs I had pitched to way back 10 years ago and I told him this story. His answer? "Oh boy, that's one I would've killed right away."

So the biggest mistake from my point of view east coast startups can make, especially if they're based in Montreal/Toronto is to believe what they read about "startup funding" on the Internet. What flies in the Valley doesn't necessarily fly anywhere else. There's a willingness/ability to suspend disbelief that is unique to the Valley, both in terms of funding and in terms of recruiting top talent.

In short, if you're trying to build a startup on the east coast (and Montreal/Toronto specifically) then focus on making money from real, paying customers, not angels nor VCs. Or just pack your bags and head west.

Re: The Big Lie of Venture Capital

#27

Post by mi100hael » Mon, May 07, 2018, 10:09 PM UTC

VC is a con-job for the most part anyway. They've convinced first-time entrepreneurs that raising money (and thereby giving away a portion of your ownership) is a great signal that your business is a good idea. Naive founders dream of getting into YC or getting funded to prove to everyone that they're smart and talented.

In fact, making money is the only signal that matters. Try doing that instead.

Re: The Big Lie of Venture Capital

#28

Post by blihp » Mon, May 07, 2018, 10:10 PM UTC

jdoliner wrote: post #24

asdfman123 wrote: post #21

Earlier quoted context omitted.

This is just another article that causes me to kick myself. I graduated from Stanford in 2010 but now am a pretty average, non-Silicon Valley programmer because I didn't want to do anything after graduating from college.

Why does this make you kick yourself? This is a guy writing an internet rant about how frustrated he is with the life you choose not to live.

I think the implication is that as a Stanford grad he had a pedigree that would have increased his chances of getting funded... but he didn't have any ideas, so now he's using his name-brand degree to do the type of work that a degree from any school would have been fine for.

Re: The Big Lie of Venture Capital

#29

Post by austenallred » Mon, May 07, 2018, 10:10 PM UTC

> So, unless you come from money, attended a prestigious university in the States or sold your previous startups for a lot of money, you should assume that you’re never going to raise early-stage capital.

Most founders are none of those things. It’s hard to raise money, of course, but the author makes it sound like it’s impossible. I’ve seen plenty of crappy companies with not much to show raise an angel round on nothing but fairy dust.

OP also argues that less than 1% of companies raise money. Does that mean that less than 1% that try to raise money are successful? I highly doubt that. That might be about the percentage that get into YC or raise from a prestigious fund in their seed round maybe, but it seems like what percentage of total businesses raise a seed round, which is a stupid thing to measure.

Re: The Big Lie of Venture Capital

#30

Post by debacle » Mon, May 07, 2018, 10:10 PM UTC

kyaghmour wrote: post #26

This article misses the fact that the "startup ecosystem" is different on the east coast vs. the west coast. And it's especially brutal when you compare the funding sources available to Canadian startups vs. US startups. See 2016 Analysis of 20,000 startups by Vancouver-based Yaletown Partners (here: www.yaletown.com/wp-content/uploads/2016/06/Canadas_Technology_Investment_Gap_Yaletown2016.pdf): “In 2015, U.S. compan…

> In short, if you're trying to build a startup on the east coast (and Montreal/Toronto specifically) then focus on making money from real, paying customers, not angels nor VCs. Or just pack your bags and head west.

This is true in Philly and to a lesser extent Boston as well.