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Startups are Financial Suicide

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Re: Startups are Financial Suicide

#13

Post by dvfjsdhgfv »

analog31 wrote: post #7
m3kw9 wrote: post #3

Ain’t all companies used to be startups?

Something I learned from reading enough HN, is that "startup" specifically refers to companies that are started for the purpose of ultimately being sold. This is as opposed to a so called "lifestyle business," which you expect to operate and produce an income to support yourself and your family. Of course these businesses can look similar from a distance, one can turn into the other, and it's possible to bet wrong on…

I don't know why you're being downvoted. Maybe because some founders don't think they're going to be rich by acquisition but rather by organic means (i.e. customers actually buying your product/service), although frankly I don't know anyone who wouldn't at least consider acquisition as a possible outcome.

Re: Startups are Financial Suicide

#14

Post by matchagaucho »

analog31 wrote: post #7
m3kw9 wrote: post #3

Ain’t all companies used to be startups?

Something I learned from reading enough HN, is that "startup" specifically refers to companies that are started for the purpose of ultimately being sold. This is as opposed to a so called "lifestyle business," which you expect to operate and produce an income to support yourself and your family. Of course these businesses can look similar from a distance, one can turn into the other, and it's possible to bet wrong on…

More specifically, the equity in a "startup" is not solely owned by the founder(s). There are liquidity exit expectations within 7 years.

Re: Startups are Financial Suicide

#15

Post by lev99 »

hartator wrote: post #4

> We raised over $25m and sold millions of dollars of product to real customers. I don’t fully get this part, even if the startup wasn’t financialy viable, why didn’t he pay himseslf something around $10-35k per month as CEO? He won’t have his savings crushed now, and probably made money for himself. Maybe I am missing something obvious.

A sacrifice for shareholder value.

Re: Startups are Financial Suicide

#16

Post by tim333 »

For the curious the startup was Shoe of Prey, I think "bespoke, hand-made women's shoes designed by the customer"

The article is a bit light on details.

forbes https://www.forbes.com/sites/davidhochman/2017/05/31/shoes-o...

crunchbase https://www.crunchbase.com/organization/shoes-of-prey

Re: Startups are Financial Suicide

#17

Post by bdcravens »

analog31 wrote: post #7
m3kw9 wrote: post #3

Ain’t all companies used to be startups?

Something I learned from reading enough HN, is that "startup" specifically refers to companies that are started for the purpose of ultimately being sold. This is as opposed to a so called "lifestyle business," which you expect to operate and produce an income to support yourself and your family. Of course these businesses can look similar from a distance, one can turn into the other, and it's possible to bet wrong on…

> "startup" specifically refers to companies that are started for the purpose of ultimately being sold

Or exiting via IPO (which of course is a type of sale)

Re: Startups are Financial Suicide

#20

Post by Judgmentality »

quickConclusion wrote: post #12

>"Over 90% of startups die" One of those widely repeated number, but not true: number is below 60%. https://www.google.com/amp/amp.timeinc.net/fortune/2017/06/2...

> Cambridge Associates, a global investment firm based in Boston, tracked the performance of venture investments in 27,259 startups between 1990 and 2010. Its research reveals that the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001. Even amid the dotcom bust of 2000, the failure rate topped out at 79%.

I am wildly skeptical of these numbers, and could not find the actual study after a quick search on Google. It seems to ignore seed investments for starters, and many "exits" (acquihires) aren't public information, so how they quantify this is ambiguous.

If we consider a startup to begin when someone decides to quit their job and work on it full-time and a successful exit as a positive ROI to most investors in less than 10 years, I'd estimate the number as closer to 99% (most people never get any funding for their startups at all). Of course, I have no hard numbers to back that up.

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