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We need a middle class for startups

neilthanedar.com

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Re: We need a middle class for startups

#61

Post by benreesman »

scarface74 wrote: post #33
baddash wrote: post #29

Earlier quoted context omitted.

If someone has been massively successful, that means they know how to be successful. It must be the case they have something of value to say. How can you make the argument they have nothing of value to say?

Or they had family with money and connections.

You’re getting downvoted because it’s almost always parents and their friends.

Pull like any tech big shot at random, their parents are rich and bought some part of their success. Gates’ folks had an IBM mainframe installed in his fucking high school.

Oh myGod, this kid Bill Gates is way ahead of the curve on computers.

Re: We need a middle class for startups

#62

Post by btown »

ttcbj wrote: post #34
boringg wrote: post #9

Earlier quoted context omitted.

Also there was a time when "lifestyle business" was getting shade as if it an inferior product for inferior people. I think that was probably just VC shade being thrown at it because they couldn't do anything with the kind of business. That and platforms probably ate away at their core offerings...

As someone who owns a lifestyle business, I think the domain of lifestyle businesses is almost entirely distinct from that of startups. Something that has the potential to be a startup (massive growth), could not be "held back" to remain a lifestyle business. And things that are lifestyle business generally cannot be grown at the pace of a startup. Almost by definition, a lifestyle business lacks the potential for ma…

This framing assumes that venture capital is both efficient and perfect at identifying potential for massive growth. In reality, there are many technology companies with potential for massive growth that are under-appreciated by the venture community - they don't fit into the right boxes, and if they were to get on the "fundraising treadmill" as the OP describes it, they'd be stuck in a situation where they're forced to spend aggressively without being able to rely on future fundraising making that burn sustainable. The good news is that would-be competitors would be in the same situation. So it's very possible for such a company to think like a startup in terms of its goals, but move at a more sustainable pace than if it were given hundreds of millions to burn. And those startups can still raise from VC when they've proven out their model, if they choose to do so - but it's important that they have a path to success as a startup that doesn't require those levels of cash injections.

Re: We need a middle class for startups

#65

Post by [deleted] »

vmception wrote: post #37
clean_send wrote: post #2

I feel like this is just trying to rebrand “lifestyle businesses” or small businesses in general. Where I grew up it wasn’t uncommon for people to have businesses that did a few million in sales and the whole family worked at. While not as sexy as getting angel investment, it sustained a quality of life that met their needs. In order to run a successful business you don’t NEED mass profits or VC dollars.

and you can always just be an investor in a business with simple % ownership and splitting net revenues at any interval you want. no multiple share classes, no liquidity preferences, no need for infinite growth or growth at all all this is still around ya know people act like they just forgot

[deleted]

Re: We need a middle class for startups

#66

Post by ajross »

I've made this comment verbally to a lot of people who seem to agree, but now that we seem to be in a firm correction maybe it's safe to say it here on HN:

The clearest, most obvious sign that the End of the Bubble was imminent was that the discussion about "startups" you'd seen in public was completely dominated by discussion of fundraising and not products. And this blog post, even though it argues against extravagant fundraising, is no different.

It's not about funding, it just isn't. Basically zero historical Unicorns needed billions of dollars in cash to bootstrap. Software companies all did it for almost free, but even Tesla (a heavy industry player competing directly with established outfits with hundreds of billion dollars in revenue!) did it on a few tens of million dollars and one too-visionary-for-his-own-damn-good angel.

The obsession with fundraising reflects the investor dollars looking for a home. It's an inherently inflationary conceit. And even now that the gravy train turned over, it's frustrating that people don't see that.

Re: We need a middle class for startups

#67

Post by roflyear »

VictorPath wrote: post #59
roflyear wrote: post #3

Am I the only one not interested in taking advice from someone who has largely been massively successful? I always feel like these are the people who generally have nothing of real value to say, they just think they do because of their bias from their success.

> Am I the only one not interested in taking advice from someone who has largely been massively successful? I think of Kevin Systrom selling Instagram to Mark Zuckerberg at Facebook. Both success stories. Systrom went to high school at Middlesex, Zuckerberg to Phillips Exeter. I can think of many examples like this. Phillips Exeter high school starts at $47,000 a year, Middlesex high school starts at $54,000 a year.…

Or just, good food, decent connections, a good education, and general support during your most important developing years. That goes a huge way and almost no one has these things.

Re: We need a middle class for startups

#68

Post by thanedar »

bradleybuda wrote: post #45

Businesses that are shooting for the "middle class" (say, less than $50M in earnings at their peak) are of course possible and healthy and good for the economy. What's missing in this analysis is that those businesses are not going to be "founder-friendly" the way that the prototypical YC-seed-stage startup is. To use the article's definitions: * "Bootstrapped from zero" is, of course, founder-friendly - no investors…

The key is that Mittelstand businesses are much less likely to fail. (This is why PEs on average outperform VCs. I go into these economics in my post.)

This can be the Goldilocks deal for founders where you raise And being VC-backed is only great if you're one of the winners. If you're one of the >90% that's written off, you're back to zero.

I hit the wall at Series B with my startup Labdoor. We pivoted to profitability and are now headed to Mittelstand land, but this all would've been way easier if we just headed straight to middle class.

Re: We need a middle class for startups

#69

Post by brightball »

roflyear wrote: post #28
brightball wrote: post #20

Earlier quoted context omitted.

I think it's important to take advice from a lot of people. It's up to you how to frame what to do with it or how much you think it applies to your current situation.

I guess my point is I always feel like such advice is really just a bunch of hot air (so little or no substance) and not really advice at all.

I'd just recommend not painting with too broad of a brush.

One of my favorite stories about Dabo Swinney, Clemson's football coach, came when he had just gotten the job and very few people had any confidence in him. ESPN rated him as a D+ hire at the time. He sat down at a coaches dinner event and a much older retired coach named Bill Curry was at his table. They struck up a conversation and Bill said, "Dabo, congratulations on the job! Can I give you 3 pieces of advice?"

And Dabo took out a pad and pencil from his pocket.

The advice was good, but the fact that Dabo was humble enough to actually take notes. Think about how much advice we just let go in one ear and out the other.

Now he's the best coach we've ever had and won 2 national titles.

Re: We need a middle class for startups

#70

Post by TuringNYC »

di4na wrote: post #55
TuringNYC wrote: post #49

Earlier quoted context omitted.

>> Initial funding. There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. For two tech founders, the first 500k is literally a year of salary for the two founders. One option here is to bootstrap without outside capital, de-risk, and raise a better round once you've de-risked. For tech founders, the best form of capital can be their own m…

As a tech person at a big tech company making 98k per year as a senior with a rent to pay. Maybe reconsider what i said and why. In particular consider that what you said highly limit who can do this and how that limit heavily the kind of company that could grow from this.

Totally considered. I did my bootstrapped startup while working a day job for the first year. The point is the value of your free time is 250k/yr. If you are smart and motivated, your time is incredibly valuable regardless of what your employer is paying you -- because you cannot easily hire that skillset with VC money.

In my case, when I was raising in 2012, the typical VC line was "go move to SF/SV and work for ramen-pay", which is ridiculous and only something rich people can do (things have changed now.) So I bootstrapped and built it myself on my spare hours (note, of course the start up should not be competing in the same market with your dayjob which would be a conflict of interest.)

Once you have a prototype and de-risking, the tables turn and VCs chase you

I mean, what is the alternative? See the GP comment I was replying to:

>> There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money.

If you're not in the circle where VCs are throwing money at you for some juice squeezing appliance, then you just have the option i've presented...or the option of not playing at all. But i'm very interested in the topic, i'd love to hear what your proposal is...because I think "poor people cant found tech startups" is not the world I would want to live in.

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