Ask HN: What's your advice for someone who's raising capital for the first time? • Hacker News Board

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#51

Post by rcdwealth » Wed, Oct 17, 2018, 2:23 PM UTC

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

If you are not well versed in company structures, than maybe you really loose control. But that depends of you.

In a LLC/LIMITED company you as shareholder/member of the company, decide of your structure. So if you do decide that you give up some shares/interest to the investors, then that can be the reason why you would loose the control.

But even if you give up all the shares, by means of controlling the initial articles of organization and operating agreement, you can still remain in full control as manager/director of the company.

In case of Limited Partnerships that issue is even better regulated from beginning, as Limited Partnership consists of one or more General Partners who are managers of the business and one or more Limited Partners who are usually investors, but cannot manage the business and often cannot even replace the General Partners.

The issue is simple.

What you decide is what you get in the end.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#52

Post by pjc50 » Wed, Oct 17, 2018, 2:24 PM UTC

CPLX wrote: post #45

kenneth wrote: post #38

I run a $30M early stage venture fund. Here's what I wish first-time founders knew: • Don't bother cold emailing me, you'll end up straight in the trash. Don't even think about reaching out on LinkedIn, I open it once a month to mark everything as spam. Instead, find someone we know in common and ask for a warm intro. I receive way too much inbound, and a referral from someone I trust is one of the best ways to skip…

This almost reads like a parody of the entitled God-complex VC mentality. I wonder how long it will be before people feel some shame advocating for overtly classist and exclusionary network-only policies in public at least.

If you're giving out millions of dollars, you'll drown in spammy suggestions. Filtering it through a personal network is an old, effective way to limit it to those people more likely to be genuine.

Which is a shame for the reasons you say - it limits it to the old boys' network.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#53

Post by kenneth » Wed, Oct 17, 2018, 2:27 PM UTC

CPLX wrote: post #45

kenneth wrote: post #38

I run a $30M early stage venture fund. Here's what I wish first-time founders knew: • Don't bother cold emailing me, you'll end up straight in the trash. Don't even think about reaching out on LinkedIn, I open it once a month to mark everything as spam. Instead, find someone we know in common and ask for a warm intro. I receive way too much inbound, and a referral from someone I trust is one of the best ways to skip…

This almost reads like a parody of the entitled God-complex VC mentality. I wonder how long it will be before people feel some shame advocating for overtly classist and exclusionary network-only policies in public at least.

Getting into YC is a great way to jump-start your network. Ultimately, having a strong network is key to building a successful venture business. Expecting otherwise is unrealistic.

VCs aren't charities. Seed investing is a business with very high quantity and low quality at the top of the funnel. Any investor who tells you they aren't giving more weight to a lead that comes recommended vs. one that doesn't is lying to you. It could be as simple as 5min to review the initial pitch vs. 1min.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#54

Post by lotsofpulp » Wed, Oct 17, 2018, 2:33 PM UTC

nobody271 wrote: post #49

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company. I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue? * It seems like something where getting started is driven entirely by having contacts in the industry. * There has to be a ton…

>I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue?

Try figuring out how much a medical procedure or visit or lab will cost before you have it done, and you will find out very quickly.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#55

Post by bkanber » Wed, Oct 17, 2018, 2:33 PM UTC

rcdwealth wrote: post #51

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

If you are not well versed in company structures, than maybe you really loose control. But that depends of you. In a LLC/LIMITED company you as shareholder/member of the company, decide of your structure. So if you do decide that you give up some shares/interest to the investors, then that can be the reason why you would loose the control. But even if you give up all the shares, by means of controlling the initial ar…

VCs typically do not invest in LLCs and will force you to form a C Corp as part of the raise.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#56

Post by JAdamMoore » Wed, Oct 17, 2018, 2:34 PM UTC

Don't take VC money. Fight for Universal Basic Income and tax the rich at a MUCH higher percentage.

VC's just sit around waiting for a regular startup to get so hot, so fast, that they simple CANNOT scale without major dollars.

With the cloud and so much physical overhead available as an online service, you don't need any VC when you reach this point. You can crowd-fund, or get a loan from a bank (shocking, I know), or (and this is my favorite) go to as many VC's as you can while you are the hot startup and demand ridiculous terms and walk away from all of them.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#57

Post by uberswe » Wed, Oct 17, 2018, 2:41 PM UTC

nobody271 wrote: post #49

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company. I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue? * It seems like something where getting started is driven entirely by having contacts in the industry. * There has to be a ton…

> How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company.

I get random ideas all the time and usually deciding to do a project will lead to something. I started with an idea where I wanted to do web analytics initially. Turns out that people liked my app more for the cool graphs that could be easily exported into slideshows and pdfs. The idea changed a lot from talking to people and I found something I never thought people would pay for.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#58

Post by beat » Wed, Oct 17, 2018, 2:44 PM UTC

nobody271 wrote: post #49

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company. I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue? * It seems like something where getting started is driven entirely by having contacts in the industry. * There has to be a ton…

Become a technical co-founder for someone with a deep knowledge of some valuable business, who has a great idea for a startup but lacks the technical skill to make it work. There are lots of them.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#59

Post by rsweeney21 » Wed, Oct 17, 2018, 2:48 PM UTC

nobody271 wrote: post #49

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company. I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue? * It seems like something where getting started is driven entirely by having contacts in the industry. * There has to be a ton…

I remember having lots of very similar questions when I first started. I'm a software engineer, so I moved to silicon valley years ago to find a CEO I could CTO for. Fortunately, I stopped looking and had the confidence that I'd be able to figure out all the business stuff. I bet on myself as the CEO.

One of the reasons why there are so many software startup opportunities is because industries are so siloed. My current startup is in Oilfield Logistics - it's literally software to aid moving sand from a mine to an oil well. I had no idea this problem existed until I talked to a friend that runs a large trucking company, and then dug into it. Key takeaway - talk to a lot of people, in lots of different locations, in lots of different industries.

As for how to get the money to bootstrap - you have to get creative, and that's what makes bootstrapping so much fun. Having a VC write you a check is so...unoriginal. If you can find a customer whose pain is more acute than the rest, you can often get them to pay in advance or have them pay to build it, but offer them a "discount" so you can retain all the IP. Now a customer is funding your startup. Or find the smallest MVP that customers will pay for and only build that. The MVP might be a spreadsheet or Zapier + Airtable. You would be surprised what customers are willing to pay for. They don't care if it's easily deployable, can be easily scaled up, or has a beautiful UI, as long as it solves their problem.

Re: Ask HN: What's your advice for someone who's raising capital for the first time?

#60

Post by ajcodez » Wed, Oct 17, 2018, 2:50 PM UTC

nobody271 wrote: post #49

rsweeney21 wrote: post #44

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC. Taking VC funding made the experience of owning and operating a business worse in almost every way. There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right…

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company. I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue? * It seems like something where getting started is driven entirely by having contacts in the industry. * There has to be a ton…

You typically have to be in the industry already and experiencing the problem first hand. If you’re technical the best opportunity is usually to partner with someone in the industry 50/50 cofounders. In the later stages you will become an expert because if you’re technical usually fast at learning.

If you have ideas for products or services to improve technical workflow that could also be a space to innovate too.