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

261–270 of 271 posts

Re: Startups Rejecting Venture Capital

#261

Post by joncrane »

I remember about 8 years ago when I was founding a company to repair cell phones. The local municipality had a program where I could meet with a mentor to help me set up a company. Create a business plan and estimate costs and revenues, which could serve as input to a loan application with a local bank.

In this scenario, the bank charges interest and does not get an ownership stake nor input into how the company is run.

Whatever happened to this way of doing things? What is it about VC that is so much better than small loans from a traditional lending institution?

Re: Startups Rejecting Venture Capital

#262

Post by NickBusey »

jarjoura wrote: post #236
NickBusey wrote: post #2

My current startup has taken VC funds. Never again. What a nightmare.

My take on work is there's always someone who will be your boss and dictate what you can and cannot do. If you bootstrap, then it'll be your paying customers. If you take family/angel/seed money, then it'll be them and their expectations. If it's VC money, they will have a seat on the board and expect you perform. If it's the public market, then every quarter you'll be expected to show significant results. I fail to…

I appreciate the thoughts, but no. That's not what is going on here. Without going into too much detail, if anything the problem is essentially the opposite of what you're describing.

Re: Startups Rejecting Venture Capital

#264

Post by SkyMarshal »

twtw wrote: post #202
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…

> 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 Isn't this what the public stock markets used to be used for, before an IPO became a way to cash out?

No, you can't take an early stage, pre-revenue company public. It takes ~7yrs plus or minus to scale a company from nothing to large enough to list on public markets, which is what VCs are for.

Re: Startups Rejecting Venture Capital

#265

Post by seesaw »

megaman8 wrote: post #116
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…

> "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.

You are not alone. I have 20+ years, and I am in a senior position with a fortune 100. I don’t get paid that much. I know most of my colleagues don’t either. I think 400k+ is more common at FAANGs. 200k and below is common for a lot of experienced developers in the Bay Area.

Re: Startups Rejecting Venture Capital

#266

Post by Mikho »

It's easy -- you build a lifestyle business or you build a big, usually scalable, business. If you are building a lifestyle business, VCs most probably even won't give you money. To grow one needs money. If you are building a big business the options are to take money as a credit or get VC money. Usually, banks do not credit those risky assets. So, the solution is obvious.

Another thing -- for a lifestyle business it's just very hard to hire anybody good without options that have no chances to be executed. Also, a good business model without aggressive growth could be copied easily by a big company that targets the same audience. Yeah, it's difficult to build a Basecamp. There are just so many examples that managed to do that. Even Atlassian took VC money at some point to be able to secure stability for the team.

So, there is no sense in the article. If founders were clueless enough not to understand what they get into by taking VC money, maybe they deserve the results.

It's important to understand from the get-go that VC money is just a tool that serves a very particular goal. If one does not target that goal, not need to get the money.

Re: Startups Rejecting Venture Capital

#267

Post by twtw »

SkyMarshal wrote: post #264
twtw wrote: post #202

Earlier quoted context omitted.

> 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 Isn't this what the public stock markets used to be used for, before an IPO became a way to cash out?

No, you can't take an early stage, pre-revenue company public. It takes ~7yrs plus or minus to scale a company from nothing to large enough to list on public markets, which is what VCs are for.

Sure, that's how it is now, but it definitely hasn't always been that way. The original public companies definitely were "early stage, pre-revenue," though you can argue that those were long enough ago to be irrelevant.

Intel's IPO was 2 years after the company was formed.

Re: Startups Rejecting Venture Capital

#268

Post by jarjoura »

wslh wrote: post #259
jarjoura wrote: post #234

Earlier quoted context omitted.

The garage stage is usually the seed round, just like YC helps make it a formal process. Get a working provable prototype up and iterate quickly on your idea to something that works and can turn a profit. Then off you go to find customers till you show demand. That's when you evaluate whether a VC fund makes sense for your business. Even back when SJ and Woz were in "the garage" stage building Apple 1s, they were see…

If you look at the capital burnt by "unicorns" (e.g. Uber, Rappi) you will find that they are more capital intensive than in the 70s, 80s since they don't need to be cashflow positive for an undefined time and their product and marketing is much more complex and detailed. A clear example of this is computer games, in the 70s and 80s consumers were happy with a few "pixels moving" and now a game require a lot of peopl…

My friend worked with Travis back when Uber was just a proof of concept in San Francisco. They used private limos and a basic app to connect the two. It worked, was cheap to build, and they proved demand rather quickly. I would call that garage/seed stage.

Airbnb was built and rebuilt several times with a few engineers in Brian Chesky’s apartment. They didn’t even have an official office for years at the beginning.

Your example is gaming, but all game startups use Kickstarter now as a way to fund the project upfront. It’s not really the same type of business and games are usually one-off finishes products.

Re: Startups Rejecting Venture Capital

#269

Post by majani »

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.

You got your waves wrong. 90s was telco and basic internet, 00s was social media and e-commerce, 2010s is the smartphone and app wave.

Re: Startups Rejecting Venture Capital

#270

Post by ergothus »

padobson wrote: post #104
ergothus wrote: post #33

As an outsider, I find myself disappointed everytime a company goes public, and VCs seem to be (1) a stepping stone to that and (2) motivated by the same concerns. As a consumer, I find that the shareholders never have my interests at heart, not even indirectly (everyone wants to make money, but a private company seems more likely to decide they make money by actually providing me value). This feels like a massive fa…

I think what you're describing is really a part of the decision making process by founders and initial investors who are taking the company public or shopping equity to VC. The default mode of a company is to increase shareholder wealth, but a company that clearly communicates to potential investors and the market as a whole that they have a different metric of shareholder value (e.g. social conscience, environmental…

> a company that clearly communicates to potential investors and the market as a whole that they have a different metric of shareholder value (e.g. social conscience

You're talking about things like Ben & Jerry's social contract. I think those are great. But here I'm talking about values like "We want to make money by making great widgets people are happy to buy". Most companies say such things, but after they go public the value seem switch to "find every way to increase the margins and take the lowest thresholds of quality and customer satisfaction that we can have and still remain in business". Compare, say, what Comcast says about customer service and what customers say.

The ideal of capitalism is that you can have profit AND happy customers. And I know it's possible, I've seen it any number of products...but I also see tons of successful companies get "killed" by short term greed, even if that company sticks around and is profitable - compared to what it was, it is dead.

Post reply on HN