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Startups Rejecting Venture Capital

nytimes.com

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Re: Startups Rejecting Venture Capital

#51

Post by theseatoms »

sonnyblarney wrote: post #34
diego wrote: post #10

One thing that not many people talk about: there's an oversupply of VC funds spawned by the technological waves of the 90s (internet), 2000s (mobile) and everything in between. Today there isn't a clear wave, yet those funds need to deploy capital. Now there are too many funds pursuing not enough VC-worthy opportunities. The VC bubble will pop sooner or later.

'Oversupply' could simply be communicated in a different supply/demand equilibrium. Cheap capital is probably not such a bad thing for Entrepreneurs. More bad companies get funded, but that's not so bad. More good companies that wouldn't have seen the light of day will also get funded. There's only a 'bubble' if there can be a significant correction. If the US economy goes into heavy recession, then maybe there will…

Sounds like the typical terms need to be negotiated in the direction of founders, away from VCs.

Re: Startups Rejecting Venture Capital

#52

Post by milquetoastaf »

hn_throwaway_99 wrote: post #39
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 think your point about employees is especially true, particularly since the large tech companies pay disproportionately so much more. If you are a senior-level software engineer, even if the startup is successful in the "unicorn" range, for most people that means an equity payout on the couple hundred K to the $1 million range for all but the very largest successes. Not bad at all, but when the FAANGS are already p…

Not everyone can get a FAANG job nor do many FAANG jobs pay >300k

Re: Startups Rejecting Venture Capital

#53

Post by hamandcheese »

hn_throwaway_99 wrote: post #39
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 think your point about employees is especially true, particularly since the large tech companies pay disproportionately so much more. If you are a senior-level software engineer, even if the startup is successful in the "unicorn" range, for most people that means an equity payout on the couple hundred K to the $1 million range for all but the very largest successes. Not bad at all, but when the FAANGS are already p…

This is assuming one can get hired by a FAANG, which is not true for many.

Re: Startups Rejecting Venture Capital

#54

Post by Heliosmaster »

mr_puzzled wrote: post #20
chillacy wrote: post #14

Earlier quoted context omitted.

> Are there any good examples of publicly traded companies which have lasted a long time (more than a few decades) with minimal impact of the "we have to keep growing" mindset? Are there publicly traded companies which _didn't_ have a thirst for growth? By definition, companies which go to the lengths of raising money on the stock exchange are exactly those who grew beyond small business / private equity levels. So t…

I should have worded it differently: what I was trying to ask was - publicly traded companies by definition have to keep growing and have the "we have to keep growing" mindset, and this often negatively impacts the products eg- facebook showing ads way too often, collecting more user data and it's parly driven by the desire to keep growing and earning more ad dollars. Fb is a perfect example of a product going downhi…

what about public companies that pay dividends?

Re: Startups Rejecting Venture Capital

#55

Post by [deleted] »

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…

[deleted]

Re: Startups Rejecting Venture Capital

#56

Post by wensing »

The Babe Ruth effect of VC's needing big hits and the entire industry being a hits-driven business (unicorns, PG's Black Swan Farming, etc.) is a relic of the VC industry being not-long-tail compatible (i.e. offline). This will change, and more money will be made in the fat long tail than the hits.

I've been writing at length about this movement (https://medium.com/swlh/the-new-bootstrappers-how-alternativ...) and the kinds of startups that will emerge as smart investments (https://medium.com/swlh/rise-of-the-transformers-db7887c2668...)

Re: Startups Rejecting Venture Capital

#58

Post by will_brown »

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 think it’s just the start, soon there will be a much larger paradigm shift.

Especially in tech where there is generally a large community of supporters who are willing to fund the projects they believe in directly.

I think the Green Bay Packers is a perfect example, it’s the only “publicly owned” football team in the NFL and as a result when they need funding for large projects (like stadium renovations) they go straight to their community supporters with “public offerings of Packers stock”...which isn’t really stock at all but a certificate and small voice in corporate governance (ie election of a small number of directors). It’s so successful of a legal structure the NFL publicly takes the position they are at a competitive advantage to the other teams which are owned by billionaires.

There is no reason Startup’s shouldn’t look at the same model and cut out all VCs, incubators, etc...

Re: Startups Rejecting Venture Capital

#59

Post by CalChris »

smartplaya2001 wrote: post #7
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…

interesting we decided to bootstrap in 2016. Chasing down VC's is such a time drain when you can focus on your product. we now have about 28k users.

Yes, this is a strong point. VC money saves time but then getting VC money takes time.

Re: Startups Rejecting Venture Capital

#60

Post by wolco »

eis wrote: post #35
chosenbreed37 wrote: post #24

Earlier quoted context omitted.

> What does that mean for founders? It means that you are putting all your eggs into one basket. > What does that mean for startup employees? Well, they got the worst of all worlds. High risk and little to no upside. Their eggs are also in one basket as they work for only one company AND they don't have the huge upsides that VCs and founders have Presumably both of them get paid for their efforts...not entirely worth…

Not worthless but the deal they get is usually a lot worse than the deal a VC gets. Are they getting paid enough to account for the risk? A VC will make more money and have less risk (overall). An employee will most likely make not much more than working for an established company and have a high chance of losing his job within a few years.

Even if successful you have a good chance of losing your job or being forced to move to fully vest your options after a buyout.

Chances are low you will be there or your job will in 5 years

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