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Startups Rejecting Venture Capital

nytimes.com

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Re: Startups Rejecting Venture Capital

#141

Post by brbrodude »

fs111 wrote: post #25
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…

Why would they care about you or your team? It is an investment, not a social service.

A company is composed of people, redo the math.

Re: Startups Rejecting Venture Capital

#142

Post by ig1 »

The real problem is that we don't have a more effective capital model. While there's lots of experiments in funding going on, no-one's really figured out a risk model that works in good times let alone bad.

Fundamentally new businesses fail at a high rate, it's the nature of new businesses. But that means cost of capital is going to be high to cover the cost, but without high-growth it's hard to justify that cost (and that's not even getting into things like fraud which are a big reason new businesses can't get financing)

Re: Startups Rejecting Venture Capital

#143

Post by hsk0823 »

lordnacho wrote: post #69

From the investor point of view, there's a clear problem with the VC model as described. How do you establish that a VC has any skill? If the game is to throw a load of money at different firms, in the hope of getting 99 losers and a massive winner, how do you tell the good ones from the bad ones? Keep in mind there's noise; a guy with alpha might have a bad day before going to meet Uber or Facebook. He then gets 100…

Define reasonable because to the VC taking the large risk, 5% YoY isn't the goal.

Re: Startups Rejecting Venture Capital

#144

Post by hsk0823 »

ti3 wrote: post #102
hsk0823 wrote: post #79

Earlier quoted context omitted.

Lots of good questions. Maybe a primer on the relationship between a VC and a founder would be helpful. Say you are a founder, you've got a killer idea, you think you can change the world with this idea but you need capital to bring it to life. Say you can demonstrate on a small scale that your idea does work, you have analysis that the market will support your idea, but you need money again to make it a reality. VCs…

The VC model is surely older than 'relatively new' and older than industrial companies of the 1900s. One example of the VC model has been around as late as the early/mid 1800s (or perhaps as early as 1600-1700s) in a different industry. Look up whaling ventures. Probably multiple other, older examples as well.

Very true, my mind was stuck on tech VC since the 70s, but yeah the idea of buying equity in a venture isn't new.

Re: Startups Rejecting Venture Capital

#145

Post by x220 »

SeanAppleby wrote: post #134
x220 wrote: post #108

Earlier quoted context omitted.

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 proje…

That's really cool. Any tips on identifying startups with this work-life balance?

Re: Startups Rejecting Venture Capital

#146

Post by eanzenberg »

dunpeal wrote: post #106
eanzenberg wrote: post #94

Earlier quoted context omitted.

Conversely, this assumes one can get hired at a startup with a high position and equity to match fang comp, which is not true for many.

It's not true for almost anyone. Conversely, if you can get hired to a unicorn in a position that's senior enough to have any hope of coming anywhere near top tech pay, then you are likely talented enough to work at top tech instead.

Not necessarily, as talents at that level which are valued in top tech may be different than talents at that level that are valued at growing startups.

There a variety of companies that pay top dollar for talent, straddling early stage startups all the way through established companies. That doesn't mean it's easy to get those jobs. It does mean that you should apply your talents where it fits.

BTW, you don't need to be at a unicorn to earn top EV. 1% of a 100M exit is 1M, which is more than the vast majority of equity grants I've heard of from FANG. Many people put 0 value on startup equity. Those people decrease their lifetime EV through misconceptions of statistics.

Re: Startups Rejecting Venture Capital

#147

Post by dunpeal »

oAlbe wrote: post #137
dunpeal wrote: post #72

Earlier quoted context omitted.

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"?

Zenefits is an example of a surefire unicorn that made too many mistakes and lost most of its value very quickly.

The key points are:

1. Startup valuations are highly volatile. There were plenty of startups that were valued above the billion dollar levels, then sold for 8 or even 7 figures.

2. While profitable established companies can also go south, such companies pay you in cash and liquid RSUs, so if they spiral down you just switch to a better performing company. Getting most of your pay in illiquid options means you risk losing multiple years of earnings in the best part of your career.

Specifically, tons of talented people took a job in Zenefits based on the assumption that their illiquid shares will be worth six-seven figures, and likely will never see anything close to that in real money. Same thing wouldn't happen for those paid in liquid assets.

Re: Startups Rejecting Venture Capital

#148

Post by tixocloud »

keithwhor wrote: post #68
tixocloud wrote: post #13

We've tried going down the VC route but no one's really been interested. So we're pushing on to get customers to help us fund it out.

That’s just the way VC works. HN posters who have never raised a round of financing in their lives love to pontificate about how cheap money is these days and how easy it is to get funded. It does look that way from the outside. However, this is actively harmful to the psychology of struggling founders, because raising money is objectively difficult. The people who don’t treat it as such are in for a world of hurt an…

Thanks. Indeed, I've found relationships and building trust to be incredible factors of success that often get missed out in all the entrepreneurial advice out there. And trust comes from just working really hard for your customers.

I've also found that some VCs don't get what we're doing (because they're not part of the industry) and some do. At least here in the UK anyway. So I've shifted my strategy somewhat to try and leverage corporate VCs while also getting them to bring us into the enterprise market.

Re: Startups Rejecting Venture Capital

#149

Post by tiuPapa »

billconan wrote: post #127
tiuPapa wrote: post #113

Earlier quoted context omitted.

> Backend in C++ Why? Is that simply because you are more familiar with the language or does the project actually require the raw power of Cpp?

1. manage the cost. I fund my project out of my pocket. knowing how expensive AWS could be (through my day job), I'd keep my code efficient. 2. yes, familiarity.

Cool to know. Do you use any framework for the backend? And if you don't mind what's the project? I am thinking about using Rust for one of my projects but I am still unsure if I should use it instead of something like NodeJs or Python.

Re: Startups Rejecting Venture Capital

#150

Post by x220 »

billconan wrote: post #117
x220 wrote: post #108

Earlier quoted context omitted.

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?

there are 2 kinds of engineers, one kind sent rockets and recollected them, made robots run and jump. The other kind, shrank blog posts to 140 characters, or added a timeout to short messages, removed the thumb down button, and called them a new feature. Today, we still remember the names of da Vinci, Tesla, Turing, not because they had a successful family ... I just want to keep the dream I had as a kid.

>Today, we still remember the names of

So you're living based on how you will be remembered by strangers? That sounds incredibly unfulfilling and doesn't sound like a good way to live. In a few hundred more years almost no one will remember the names of those people either.

>da Vinci, Tesla, Turing

It's incredibly safe to say that you are not going to be as successful as these people. Almost no one achieves this much success in the sciences. At most you will probably advance your field by a few useful steps and then be personally forgotten about except in research paper footnotes.

>not because they had a successful family

You know who cares about you and remembers you more significantly than as a research footnote? Your family.

>I just want to keep the dream I had as a kid

Man, don't we all.

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