Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Startups Rejecting Venture Capital

nytimes.com

Post reply on HN
Print view View original

131–140 of 271 posts

Re: Startups Rejecting Venture Capital

#131

Post by mikepurvis »

woolvalley wrote: post #107
mikepurvis wrote: post #43

Earlier quoted context omitted.

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 BigC…

As some counter ancedata, I worked at a relatively successful startup for several years and I ended up as a sr eng in big co anyway after the experience. Startup options ended up being effectively zero. I should of hopped to big co sooner instead, I would of been significantly ahead of my life's savings goals if I did, and possibly would of bought my house at a far cheaper price because I had the money to pay for the…

Yeah, for sure. I'm in the fortunate position of having picked (and contributed to, of course) what I believe is a winner. Part of this strategy has to be a willingness to constantly reevaluate the leadership team, progress, and strategy of the organization, and get out fast if it's no longer looking good.

I can definitely picture that there'd be a high vulnerability to sunk-cost thinking.

Re: Startups Rejecting Venture Capital

#132

Post by ttul »

luxmanR1050 wrote: post #125
lpolovets wrote: post #49

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 V…

What's the smallest annual net income target (say, within 10 years) for a company that you would suggest VC is a good fit for?

$100M - that is the level at which an IPO becomes feasible. This implies that whatever idea you are pursuing needs to have a potential scale far beyond $100M if things go right, because you can’t IPO at $100M if investors don’t believe that $200M is around the corner.

Re: Startups Rejecting Venture Capital

#133

Post by mschuster91 »

ngngngng wrote: post #100

One thing I don't understand about VC money, and i'm not even sure how to phrase this, are the founders of startups able to pay themselves enough that they're set even if the business fails? What's to stop intelligent people from getting funded, paying themselves large salaries, and then not really caring if it fails or not because you're a couple hundred thousand dollars richer?

> What's to stop intelligent people from getting funded, paying themselves large salaries, and then not really caring if it fails or not because you're a couple hundred thousand dollars richer?

The same thing that many VC-backed companies like to ignore (Airbnb, Uber as the most egregious): laws and courts. This kind of behavior can be classified as fraud, intentional bankruptcy or securities law violations.

Re: Startups Rejecting Venture Capital

#134

Post by SeanAppleby »

x220 wrote: post #108
billconan wrote: post #105

Earlier quoted context omitted.

the startup is in robotics, highly aligned with my interests.

All the startup employees I've talked to work 80 hours a week. Why is robots so important to you that you're willing to accomplish absolutely nothing in at least a few of the important areas of your life such as health and fitness, friendships, romantic relationships, extraneous interests, relaxation, or family?

Anecdotally, I worked as a software engineer at a very small (10-15 person) startup that just got acquired by FANG, and I, as well as almost everyone else there, generally worked 40 hour weeks. My relationships were fine, I went to the gym most days, and I worked on a masters in AI on the side, and I also learned a lot more than I would have at large companies since I got to own way more complex and interesting projects than I would have if I had just taken a job at FANG.

I feel like a lot of it comes down to how strong your management team and market position are. Our CEO had a pretty crazy track record, and drove the company into a really interesting, strong position, and then wanted himself to have a good, sustainable family life, and would constantly reiterate that he wanted everyone else to do the same.

I have other friends who have had roughly the same experiences, again, anecdotally.

Re: Startups Rejecting Venture Capital

#135

Post by ttul »

peterlk wrote: post #18

This might be an unpopular opinion, but my view of VC money has changed significantly in the last couple years. Raising money is a failure mode. If you are raising money it is because you failed at something and you need the money to catch yourself. This is more true for software companies than, say hardware companies, but I think is still generally true. For example, if you are raising because you need to hire peopl…

Raising money does indicate failure. Was Google failing when they raised $25M in 1998? No. They raised because in order to build out their product, they needed capital up front. Several years later, the bet paid off massively.

Companies should always be raising capital to match their expected growth trajectory. If you expect to grow by 10% a year - a lifestyle outcome - then get a bank loan because you are probably profitable. If you can grow by 100% a year then go get VC because that kind of growth would be adequate to reward the VC for the risk that naturally comes along with that rate of growth. Somewhere in the middle? Maybe revenue financing is appropriate.

But you should always be financing your growth.

Re: Startups Rejecting Venture Capital

#136

Post by lpolovets »

luxmanR1050 wrote: post #125
lpolovets wrote: post #49

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 V…

What's the smallest annual net income target (say, within 10 years) for a company that you would suggest VC is a good fit for?

If you think you only need that first round of funding ($1m-$3m seed round) and would never need to raise again, then $25m+/year would be reasonable. A company like that could exit for $150m-$250m in 10 years, and if the seed investor is getting 20x or 30x on their investment, they'll be happy.

However, 1) a lot of seed stage companies predict that "this is the last round of funding we'll ever need" and that's rarely the case, and 2) because of #1 it's hard to convince investors that you'll never need to raise more money.

For most VC-backed companies -- the ones that raise multiple rounds before an exit -- $100m+/year in revenue is a good 10-year goal. That's about the level required to go public or exit for $1b+.

Investors won't be unhappy if you shoot for $100m in annual revenue but "only" hit $40m or $6m. The nature of startups is that most don't end up going public. But it's hard to see any path where you could end up with $100m+/year in revenue within a decade, then most VCs will pass.

Re: Startups Rejecting Venture Capital

#137

Post by oAlbe »

dunpeal wrote: post #72
hn_throwaway_99 wrote: post #39

Earlier quoted context omitted.

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…

Precisely. A senior engineer can certainly hope to make $400k or more per year for good performance. Not just in FAANG either - plenty of other profitable businesses are competing for the same grade of talent and thus pay in the same range. Only a handful of almost surefire unicorns can reasonably come anywhere near matching that, and that only in the eventuality that they don't pull a Zenefits and leave you hundreds…

Pardon the ignorance, what does it mean to "pull a Zenefits"?

Re: Startups Rejecting Venture Capital

#138

Post by realbarack »

mosdl wrote: post #128
megaman8 wrote: post #116

Earlier quoted context omitted.

> "hope to make 400k" Even with 10-20 years of experience in the bay area at small, medium, large size software companies, I've never ever made anything close to that amount.

don't listen to them, the FAANG pay thing is only for select few and is obviously a bubble waiting to pop

People are talking about total compensation, not just cash.

Re: Startups Rejecting Venture Capital

#139

Post by hsk0823 »

will_brown wrote: post #119
hsk0823 wrote: post #97

Earlier quoted context omitted.

The Packers model works because it's basically a scam, no one in Green Bay actually has any say over what the Packers do day to day but it feels good for Packer fans to say they own a part of the team. There's emotional buy in, it's not a rationale way to invest your money, and no one lends money with the idea that they're not going to see it again as a business. Community support projects work for Kickstarter or Ind…

The Green Bay Packers are valued at $2.35B...not bad for a non-profit. How is the Packers model a scam? Because people support it and don’t get profits? Does that make the 90% of VC funded startups that fail scams? Are other NFL teams that are privately owned scams, because as I said the NFL publicly acknowledges the Packers community ownership is a competitive advantage over the other teams. Sure maybe people won’t…

It's a scam because the equity have any decision making power. It's still controlled by a small group of people aka the board of directors, the stock structure is setup that fans could not mount a hostile takeover. It's called ownership, but it's not, it has no value, it cannot ever be sold back, it doesn't grant you any say over how the team operates. The Packers are not a community owned organization, it's operates no different than any other NFL team, decisions are not made by the fans. The Packers aren't really community owned organization, a real community owned organization whose members have actual power over the organization. Those are very few and far between, are generally non profits, and in the end, no ability for outside investors to get the profits they're looking for, thus they won't bother to invest.

You hear from time to time small to mid sized business that are "employees owned and operated" but that doesn't mean every employee has the same equity, the generally ownership will have the largest stake anyway with employees having very little control or equity compared to ownership

Re: Startups Rejecting Venture Capital

#140

Post by hsk0823 »

sflanagan wrote: post #95
will_brown wrote: post #58

Earlier quoted context omitted.

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 st…

Who makes money off of the Packers? Startups may not be willing to take this model on if its less profitable for founders

The organization does, it's a non profit, it gets reinvested into the team coffers to be spent. There's no dividend or anything like that.
Post reply on HN