Consumer startups that said no to investor money • Hacker News Board

Re: Consumer startups that said no to investor money

#11

Post by convolvatron » Thu, Aug 30, 2018, 6:01 PM UTC

lilbobbytables wrote: post #7

acconrad wrote: post #5

I'm not surprised. The default for starting a startup seems to be that you need VC funding because you need to monopolize as fast as possible and having extra cash will allow you to get there sooner than if you were to bootstrap. What we're seeing is that growth is able to happen in spite of the frothy VC environment, not because of it. So if it is possible, then why would you have to seek funding? If you think getti…

Do you believe it's worth taking on investors to bring in people that have both connections and input that will be helpful for growing your product?

the most important thing I've found is the marketing/press around raising itself. particularly if the VC in question is seen as selective and top tier.

that has some nice benefits around getting decent legal counsel, banking, recruiting, etc. everyone treats 'foo ventures' backed companies with more consideration by default.

otherwise..meh..most of the people they are really excited for you to meet (i.e. bring on as VP whatever), aren't that interesting. and while yes, you may get a few forced sales because you share a VC with someone, in some sense thats strictly less valuable than organic growth.

the VC is always going on about how valuable they are going to be to you...the reality is that if you aren't going to fulfill _their_ vision for your company soon enough, they will do everything they can to restructure the company so that someone else can.

Re: Consumer startups that said no to investor money

#12

Post by andyidsinga » Thu, Aug 30, 2018, 6:03 PM UTC

We're following a very similar philosophy of bootstrapping a set of businesses we're working on [1].

reasons are :

1. we want to stay flexible and put out a variety of businesses that might not be similar except in that we're leveraging our skills to build them. From my experience in venture funded startups - once you take funding for that business - radically changing direction or adding unrelated businesses seems impractical.

2. we want to keep full control and ownership - so that if an opportunity arises to sell the business we can do it with minimal hassle.

4. we're skeptical of our own ability to raise vc; and worried about all that that exercise entails - especially the potential distractions.

[1] "Yukon Data Solutions" is our first; we have a few other analytics related businesses in the pipeline; but also, interestingly some direct to consumer products that sort of fall into the "fashion" category.

Re: Consumer startups that said no to investor money

#13

Post by leowoo91 » Thu, Aug 30, 2018, 6:06 PM UTC

acconrad wrote: post #5

I'm not surprised. The default for starting a startup seems to be that you need VC funding because you need to monopolize as fast as possible and having extra cash will allow you to get there sooner than if you were to bootstrap. What we're seeing is that growth is able to happen in spite of the frothy VC environment, not because of it. So if it is possible, then why would you have to seek funding? If you think getti…

You dont necessarily have to give a board seat to get funding. Some VC would happily accept that.

Re: Consumer startups that said no to investor money

#14

Post by andyidsinga » Thu, Aug 30, 2018, 6:26 PM UTC

Related to this - there is a podcast ep on "How I built this" with the Wayfair people. I find it very interesting that they built several businesses - and then got investment to build the Wayfair brand and bring those businesses under that brand.

https://www.npr.org/2018/06/07/601985854/wayfair-niraj-shah-...

Re: Consumer startups that said no to investor money

#15

Post by ryanSrich » Thu, Aug 30, 2018, 6:29 PM UTC

leowoo91 wrote: post #13

acconrad wrote: post #5

I'm not surprised. The default for starting a startup seems to be that you need VC funding because you need to monopolize as fast as possible and having extra cash will allow you to get there sooner than if you were to bootstrap. What we're seeing is that growth is able to happen in spite of the frothy VC environment, not because of it. So if it is possible, then why would you have to seek funding? If you think getti…

You dont necessarily have to give a board seat to get funding. Some VC would happily accept that.

Yeah I've read the high growth handbook as well.

Most VCs will not give up a seat, and most companies have absolutely no leverage.

The overwhelming majority of startups need funding to survive, this throws off the balance of control. The only startups that can dictate funding terms are the ones that have no real need to raise. Of course there are concessions, but relinquishing a board seat is not a common one.

Re: Consumer startups that said no to investor money

#16

Post by eitally » Thu, Aug 30, 2018, 6:31 PM UTC

I think it's stupid to overuse the term "startup" where it doesn't make sense. At what point is something just a new small business? Is there an arbitrary set of lines that differentiate between "startups" and every other new enterprise? The vast majority of new businesses are funded solely by personal savings, friends & family, and SBA loans.

Conflating something like a deodorant company with a pure play tech startup just doesn't make any sense to me, especially when the intent is to analyze and compare funding models, performance and exits. And even if you consider new SaaS companies, there are thousands more Bingo Card Creators out there than [insert unicorn here].

Re: Consumer startups that said no to investor money

#17

Post by MicahKV » Thu, Aug 30, 2018, 6:35 PM UTC

I've been reading about VC and all it entails for years now, and it always leaves me with a sketchy feeling. Pouring so much time and effort into chasing capital, and then giving up so much ownership and being on the hook for big returns once it's finally attained... seems like a sure way to suck the soul out of any business.

Not saying VC doesn't have a place in the world, but I get the sense that a lot of founders pursue VC just because that's what startups are "supposed" to do.

Re: Consumer startups that said no to investor money

#18

Post by andyidsinga » Thu, Aug 30, 2018, 6:38 PM UTC

eitally wrote: post #16

I think it's stupid to overuse the term "startup" where it doesn't make sense. At what point is something just a new small business? Is there an arbitrary set of lines that differentiate between "startups" and every other new enterprise? The vast majority of new businesses are funded solely by personal savings, friends & family, and SBA loans. Conflating something like a deodorant company with a pure play tech startu…

Agreed about the definition of "startup" vs small business - murky.

That said, I think the article positioned their definition of startup by comparing bootstrapped/less-funded companies to Honest (also referenced Honest's challenges vis a vis Seventh Generation).

Re: Consumer startups that said no to investor money

#19

Post by jl2718 » Thu, Aug 30, 2018, 6:41 PM UTC

convolvatron wrote: post #11

lilbobbytables wrote: post #7

Earlier quoted context omitted.

Do you believe it's worth taking on investors to bring in people that have both connections and input that will be helpful for growing your product?

the most important thing I've found is the marketing/press around raising itself. particularly if the VC in question is seen as selective and top tier. that has some nice benefits around getting decent legal counsel, banking, recruiting, etc. everyone treats 'foo ventures' backed companies with more consideration by default. otherwise..meh..most of the people they are really excited for you to meet (i.e. bring on as…

Forced sales = 0-cost revenue pumping.

Just move money around in a big circle.

Re: Consumer startups that said no to investor money

#20

Post by jtmarino » Thu, Aug 30, 2018, 7:24 PM UTC

steven2012 wrote: post #6

I was sad to see Tuft and Needle get acquired by Serta. I bought 3 TN mattresses from their post here, and I love them. I vociferously recommended them to anyone I know. I really doubt their quality will continue to be maintained now that they are in the grips of Serta, but I guess next time I am in the need for a mattress in about 10 years, I'll check.

Hey this is JT, Tuft & Needle co-founder. Firstly, thanks for all your support and please send any feedback or thoughts any time. I'm at jt@tn.com.

Since we started Tuft & needle in 2012, we've been bootstrapped and have been growing very fast while being profitable. We didn't view this merger as something that we needed to do. But it was something that we knew if done right and everything aligned with our goal of completely disrupting (converting it to being customer focused) the mattress industry from beginning to end, we would do it.

This wasn't a typical acquisition. Tuft & Needle combining with Serta Simmons was a merger operationally, legally, and financially. My co-founder Daehee and I structured the deal with Serta Simmons in such a way that we would have maximum impact towards accelerating the transformation of the industry. Daehee and I will be joining the executive team of the combined company, leading with the goal of both internal and external transformation. Our team in Phoenix will be not only be focused on growing Tuft & Needle, but also for dusting off Serta Simmons' other brands and implementing everything that we've learned and built to the other brands.

Regarding quality, what's really exciting for us is that through this merger we will be able to accelerate our product, feature and service roadmaps for Tuft & Needle. What we could do in 5 years we can now do it almost immediately. Specifically regarding quality and pricing, this is actually best case scenario for our customers, because we'll have access to more efficiencies to make our value and innovations even better.

Again, thanks for your support. This is going to take a lot of time and a lot of work. What we expected and hoped from our customers is cautious optimism that we can then validate and prove over the coming years that this merger was definitely the greatest step we could have taken for our customers and the market as a whole.