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A Fundraising Survival Guide

paulgraham.com

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Re: A Fundraising Survival Guide

#71

Post by zandorg »

skmurphy wrote: post #36
davidw wrote: post #13

Earlier quoted context omitted.

Depends on the economics of what you're doing: - Winner take all markets with strong positive network externalities have bit first mover advantages: eBay. - Products requiring large investments probably require investments: if you trade time for money, you might be really late to market compared with a firm that got money. - Products where it's easy to start competing and carve out a nice probably don't require much…

eBay was far from the first on-line auction site. In particular OnSale was founded a year earlier was running on-line auctions in May of 1995 six months before eBay was founded.

Ah, OnSale! I emailed Jerry Kaplan (of OnSale, previous CEO of Go) after reading his book Startup and he replied saying he's doing fine, something most authors don't do.

Re: A Fundraising Survival Guide

#72

Post by noor420 »

pg wrote: post #52
noor420 wrote: post #47

So PG, you read 800 applications and invite 100 for interview. Then you invest in only 1 or 2? I hope this is not the case with other VCs.

Those aren't our numbers. Those are David Hornik's. We accept a much higher proportion.

I see, my bad, didn't read properly.

Re: A Fundraising Survival Guide

#73

Post by davidw »

nostrademons wrote: post #58
davidw wrote: post #13

Earlier quoted context omitted.

Depends on the economics of what you're doing: - Winner take all markets with strong positive network externalities have bit first mover advantages: eBay. - Products requiring large investments probably require investments: if you trade time for money, you might be really late to market compared with a firm that got money. - Products where it's easy to start competing and carve out a nice probably don't require much…

Kinda amusing that you picked eBay, because eBay was bootstrapped. It was one of very few startups where the founder was making more from his startup than his day job, before quitting his day job.

They did take venture capital though, at some point, according to the wikipedia page. It could be that that is what gave them the edge to ramp up over other sites.

Re: A Fundraising Survival Guide

#74

Post by jfno67 »

The point that caught my eye is the "ramen profitable" one. We are at this point now, the amount is quite bigger, but we are 2 founders in their 30's with children so this is a lot of ramen. Also the wifes appreciate variety so "ramen profitable" for us is more like 10K/month. Our problem with financing now with this is that to built those revenue we had to sacrifice much of our vision and just concentrate on execution. Now we have a startup that needs about 4 days of work a month and generate some money. But it is not a sexy company. All the answer to basic VC questions for it are bad or not good enough. Like no barriers to entry, the competition is huge, etc...

So we could go back to the vision project and start that "great idea" we had, but instead we often find ourselves trying to make the current product generate more revenues.

I think that may be responsible with the problem PG sees with bootstrapping. "The mere fact that bootstrapped startups tend to be famous on that account should set off alarm bells." I think there are a lot of successful bootstrapped startup that are just not successful enough to be famous in any way. Ours is heading that way.

Re: A Fundraising Survival Guide

#75

Post by sabat »

netcan wrote: post #42

I think PG has said this before. There is incompatability between: A. VCs are 'funds' (IE they need to invest a big amounts) B. Partners only invest 1-2 times per year C. Startups are (or can be) cheap One of them has to give. Seems like its C.

I have to suspect that B is less fact than it is VC posturing. To my knowledge, a partner who only invested once or twice per year would soon lose his position. His job is to make money for the firm, and if he's not investing very much, he's not going to make money.

While I have no reason to doubt the indubitable PG, I have a feeling that Mr. Hornik is fibbing or is in a unique position to under-deliver for August Capital.

Let's put it this way: if very very few startups ever get funding, how do you explain Podshow and Meebo getting so much money with such unproven/unreliable revenue models? Don't tell me it was "pure chance". I think it is/was because VC is more readily available than Mr. Hornik's self-important attitude would imply.

Re: A Fundraising Survival Guide

#76

Post by pongle »

Interesting, the article makes me want to write something entitled: "How fundraising is similar to selling a house, and why." (at least in the UK)

The timescales, rejection rates, legal layers and lack of trust between the participants seems very similar.

Re: A Fundraising Survival Guide

#77

Post by netcan »

sabat wrote: post #75
netcan wrote: post #42

I think PG has said this before. There is incompatability between: A. VCs are 'funds' (IE they need to invest a big amounts) B. Partners only invest 1-2 times per year C. Startups are (or can be) cheap One of them has to give. Seems like its C.

I have to suspect that B is less fact than it is VC posturing. To my knowledge, a partner who only invested once or twice per year would soon lose his position. His job is to make money for the firm, and if he's not investing very much, he's not going to make money. While I have no reason to doubt the indubitable PG, I have a feeling that Mr. Hornik is fibbing or is in a unique position to under-deliver for August Ca…

I don't know much about VC structures. How much they need to invest per year. How many partners, etc.

But I assume that even if the numbers are off, the principle stands: They invest in few companies per year, so they need to invest large amounts.

Maybe VCs (or the ones currently around) don't need to be investing in software startups any more. The classic model is that VCs fund risky industries that need a lot of startup cash (like sailing to India to buy spices). If that's not software anymore, maybe they need to get out. At least out of some software areas.

Actually, I was surprised at the numbers he was talking about: 50k, 200k..

Re: A Fundraising Survival Guide

#80

Post by dmoney »

[3] One VC who read this essay wrote:

"We try to avoid companies that got bootstrapped with consulting. It creates very bad behaviors/instincts that are hard to erase from a company’s culture."

What are those?

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