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Startups Rejecting Venture Capital

nytimes.com

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Re: Startups Rejecting Venture Capital

#41

Post by NickBusey »

amelius wrote: post #37
NickBusey wrote: post #4

Earlier quoted context omitted.

I think TFA did a better job with that than I ever could. Regardless, my short summary is that VCs, in my experience, are the worst of people who don't give a shit about you or your team, and just want to see more and more money. I don't want to deal with or be involved with people like that. Edit: Also I should note, many of our VCs pitched themselves as 'angel' and 'impact' investors. So, while I didn't expect them…

What exactly does "cut-throat" behavior entail in this case?

I've probably already said more than I should at this point under my 'real name'. Maybe once things are fully done and settled I'll do a write up.

Re: Startups Rejecting Venture Capital

#42

Post by eis »

IMTDb wrote: post #27
eis wrote: post #8

VCs win if enough of their bets make it big enough to offset the ones that go under. Naturally the big hits are few and the ones that fail are numerous. That means the big hits need to be huge and the failures need to have a certain cap. The latter also means you can't run a company for 10 years in slowmo until they get profitable. And the big hits need to be huge which means they need to take over a nice chunk of a…

I agree with your statement, but only if you consider that employees have a significant downside of working at a startup that goes under. Usually they are able to jump ship sooner than the founder and don't loose any personal investment in the process they get more responsibilities and more independence which in turn can get them to higher salaries faster. Employees at startup usually get paid a bit less than "market…

I agree with yours as well. But to add to that: there are VC startups that are fun and exciting to work at and there are ones that are horrible. And the same goes for big companies btw. Overall though, the chance of finding more freedom and excitement is with small VC startups, sure.

The employees that can jump ship quickly are the good performers that also live somewhere with ample opportunity. Those also are rarer than the average Joe Dev.

I'm not saying it's always a really bad dicision to join a VC funded startup. But in the majority of cases, people would probably be better off not to - at least financially. Of course (and luckily) there are more factors than that.

Re: Startups Rejecting Venture Capital

#43

Post by mikepurvis »

IMTDb wrote: post #27
eis wrote: post #8

VCs win if enough of their bets make it big enough to offset the ones that go under. Naturally the big hits are few and the ones that fail are numerous. That means the big hits need to be huge and the failures need to have a certain cap. The latter also means you can't run a company for 10 years in slowmo until they get profitable. And the big hits need to be huge which means they need to take over a nice chunk of a…

I agree with your statement, but only if you consider that employees have a significant downside of working at a startup that goes under. Usually they are able to jump ship sooner than the founder and don't loose any personal investment in the process they get more responsibilities and more independence which in turn can get them to higher salaries faster. Employees at startup usually get paid a bit less than "market…

I would agree with all of this. I'm a first employee and I have had a huge amount of influence, responsibility, and flexibility over the years— I could easily walk to multiple other opportunities for 1.5-2x salary at this point, and having the option to do that is actually worth more to me than the cash gained from actually doing it. The career growth that has made this possible wouldn't have happened working at BigCo.

As far as I can tell, the biggest issue with most early employees is not being able to exercise your stock options— the ones that vest first you can't afford, and by the time the later ones vest, the tax bill would be too great. So if you want to leave before an exit, you're either walking from your options, bank-financing it, cutting some kind of side deal with a VC to finance it, or working out a deal with the board to buy you out over time.

Re: Startups Rejecting Venture Capital

#44

Post by lpolovets »

jchrisa wrote: post #38
trjordan wrote: post #31

I get the disdain for VCs -- it's a specific model with a specific set of failure modes. So that's fair. What I don't understand is this dislike for investing ahead of growth or success. Why is the expectation that everything can be done bootstrapped or constantly profitable? Companies take investment. If you're building a product that will be valuable for a long time, there will always be a period at the beginning w…

Free healthcare, free college, and a UBI would go a long way toward making starting a company realistic for more people.

None of these things are free. Doctors, teachers, schools, and income guarantees cost money, and that money has to come from somewhere (i.e. taxes).

The (unfortunate) reality is that for most people you either need a lot of savings or an investor to get a company off the ground [1]. I am skeptical that free education or a $10k/year UBI would change that.

[1] One notable exception is companies that can be started on the side, but UBI would not affect those very much, either.

Re: Startups Rejecting Venture Capital

#45

Post by akiselev »

trjordan wrote: post #31

I get the disdain for VCs -- it's a specific model with a specific set of failure modes. So that's fair. What I don't understand is this dislike for investing ahead of growth or success. Why is the expectation that everything can be done bootstrapped or constantly profitable? Companies take investment. If you're building a product that will be valuable for a long time, there will always be a period at the beginning w…

> What I don't understand is this dislike for investing ahead of growth or success. Why is the expectation that everything can be done bootstrapped or constantly profitable?

I don't see a disdain for investing, I see a general disdain for the misaligned incentives between founders and investors which has been around SV for decades. It's been a heated topic of debate at least since Steve Jobs was kicked out of Apple and yet the VC industry keeps growing and growing.

Re: Startups Rejecting Venture Capital

#46

Post by sturgill »

jchrisa wrote: post #38
trjordan wrote: post #31

I get the disdain for VCs -- it's a specific model with a specific set of failure modes. So that's fair. What I don't understand is this dislike for investing ahead of growth or success. Why is the expectation that everything can be done bootstrapped or constantly profitable? Companies take investment. If you're building a product that will be valuable for a long time, there will always be a period at the beginning w…

Free healthcare, free college, and a UBI would go a long way toward making starting a company realistic for more people.

Paid for by?... I distrust free anything. VCs aren’t free money; healthcare is paid for by someone; professors have a salary even if tuition is waived; UBI requires cash to materialize from someone’s efforts...

Further removing people from the most important parts of life and entrusting those to a benevolent central authority is a risk I’d personally _not_ take. The lessons I learned from the most recent US presidential election is how grateful I am for separation of powers and limits on the scopes that any one person (or branch of government) can actually impose on my day-to-day life.

I’d prefer to not see UBI furloughed because two parties I’m not connected to would prefer to grandstand over a budgetary rounding error than solve problems.

Re: Startups Rejecting Venture Capital

#47

Post by Retric »

IMTDb wrote: post #27
eis wrote: post #8

VCs win if enough of their bets make it big enough to offset the ones that go under. Naturally the big hits are few and the ones that fail are numerous. That means the big hits need to be huge and the failures need to have a certain cap. The latter also means you can't run a company for 10 years in slowmo until they get profitable. And the big hits need to be huge which means they need to take over a nice chunk of a…

I agree with your statement, but only if you consider that employees have a significant downside of working at a startup that goes under. Usually they are able to jump ship sooner than the founder and don't loose any personal investment in the process they get more responsibilities and more independence which in turn can get them to higher salaries faster. Employees at startup usually get paid a bit less than "market…

Employees only make close to market rate if you ignore hours worked. The reality is it’s often a huge sacrifice with minimal upsides.

Re: Startups Rejecting Venture Capital

#48

Post by collyw »

eis wrote: post #42
IMTDb wrote: post #27

Earlier quoted context omitted.

I agree with your statement, but only if you consider that employees have a significant downside of working at a startup that goes under. Usually they are able to jump ship sooner than the founder and don't loose any personal investment in the process they get more responsibilities and more independence which in turn can get them to higher salaries faster. Employees at startup usually get paid a bit less than "market…

I agree with yours as well. But to add to that: there are VC startups that are fun and exciting to work at and there are ones that are horrible. And the same goes for big companies btw. Overall though, the chance of finding more freedom and excitement is with small VC startups, sure. The employees that can jump ship quickly are the good performers that also live somewhere with ample opportunity. Those also are rarer…

> also live somewhere with ample opportunity.

Isn't that where the vast majority of startups are based though?

Re: Startups Rejecting Venture Capital

#49

Post by lpolovets »

Caveat: I'm a VC, so I definitely have a horse in this race.

A few misc comments:

- VC is not for every company. Most VCs will be the first to tell you that: if you're not trying to build for a specific type/size of outcome, then VC funding is going to suck for you, and it's going to suck for the VC. It's not at all in a VC's best interest to invest in a company that has no desire to fit the VC model.

- I think the VC model itself is a great development from the last century. The fact that someone can raise millions (more than most people earn in a lifetime!) with an idea enables a lot of innovation that would be hard to nurture otherwise. But because the failure rate is high, VCs have to bet on outlier outcomes. That works for the VC but isn't always ideal for the companies they fund (because the founder is all-in but the VC can absorb many losses as long as at least one of their investments is a big winner).

- Many VCs add value and are great, but many other VCs subtract value and are awful. I've met people from both groups over the last 6 years in this job. It's not different than most jobs: there are amazing and awful teachers, politicians, engineers, doctors, etc.

- I love all of the new models coming up: revenue-based funding (SaaS capital), funding for ad-based acquisition (Clearbanc), Indie.vc, etc. The more types of investment models there are, the better off everyone will be. If the only companies that look for VC funding are the ones that require VC funding because no other funding model would work, then that's a good scenario because no one is wasting each other's time or looking for suboptimal funding options.

Re: Startups Rejecting Venture Capital

#50

Post by duxup »

eis wrote: post #8

VCs win if enough of their bets make it big enough to offset the ones that go under. Naturally the big hits are few and the ones that fail are numerous. That means the big hits need to be huge and the failures need to have a certain cap. The latter also means you can't run a company for 10 years in slowmo until they get profitable. And the big hits need to be huge which means they need to take over a nice chunk of a…

"VCs were able to control the startups they invested in to a pretty big degree."

I don't think you're wrong, but I always thought VCs were there to hopefully guide these organizations too. Control, guide, probabbly overlap a lot. But the idea being you get capital, introductions, maybe help finding some people you need?

Granted I don't think you're wrong about the rest of it but control (when you sold yourself...), also guidance are weird venn diagrams. Not sure there is a right or wrong there.

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