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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

#81

Post by munificent »

di4na wrote: post #44

As someone that has been working hard in this domain, there is one major problem to this in software. 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. You used to raise that money through other local mittrlelstands. At the Masons lodge. At the local kiwanis or Rotary. But these have closed to young member decades ago…

> The current young people simply are too unstable and too close to poverty to take the risks.

One piece of the solution that is very clear to me and contains many other upsides is better access to healthcare. The fact that Americans mostly get healthcare through large corporate jobs significantly ratchets up the risk of entrepreneurialism. A better healthcare safety net would make it safer to leave the safe confines of a corporate job that provides health insurance.

Re: We need a middle class for startups

#83

Post by marcosdumay »

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.

It's about financing, not about branding. It's just yelling "hey, people stop ignoring 80% of the market!"

Re: We need a middle class for startups

#85

Post by munificent »

cortesoft wrote: post #74
dontreact wrote: post #6

My sense is that in general, and especially in software, the world is becoming more of a winner take all place. This is not a good thing.

With near zero marginal costs associated with software, it makes sense for a winner take all outcome to be the equillibrium.

...which is why you need strong regulatory oversight if you want the software market to have any functioning level of efficiency.

The economies of scale are enormous in software (and data-oriented businesses in general). That's good for the efficiency of any given enterprise, but it pushes very heavily towards monopolization and zero competition without regulatory force to counterbalance.

Re: We need a middle class for startups

#88

Post by di4na »

TuringNYC wrote: post #70
di4na wrote: post #55

Earlier quoted context omitted.

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 ram…

I mean the problem is not only poor people. It is that access start at 250k a year which is really hard to get even in tech.

The reason it is harder in tech to get funding for these good ideas that could be profitable has multiple factors

1. As pointed, decoupling of relationship between entrepreneurs and "old money". This could be rebuilt even a the local government level with reach out actions

2. The untangibility of tech assets make banks loans near impossible to get

3. People cannot afford the risk. Better safety net would help. Obamacare was a good first step. Far more are needed.

4. The winner take all model has failed to generate profit. It generated capital returns but as pointed out by OP, pretty bad one. But it needed a lot of capital and LPs had a lot of money to throw around. The current inflation and folding back to Value investment will help. But we need to make the point.

5. The rise of passive investing has reduced the amount of money available to these kind of "semi anateur small rounds". The return to a less bullish market may help.

6. Housing. A lot of money and security rn for young people is sinked in rent

7. O'Reilly had amazing result with Indie.vc. The LPs refused to invest. There is a story that need to be told more. We need dozens of people banging the drum on this.

In the end... i don't have a solution sadly. We need a return to fundamentals to make the story of these models work. Focus on real possible profit and not some "we will control the world". FAANG are the exception. Not the rule. LP need to realise that.

Re: We need a middle class for startups

#89

Post by toss1 »

Reminds me of talking to a VC who said that one of his investments 'turning into a $20MM company is the WORST outcome'.

The reasoning was that if the company just tanked, he had no ongoing issues, it was gone. Now, he still has his time & resources occupied by an ongoing company, even if minimally, it's a distraction...

Re: We need a middle class for startups

#90

Post by di4na »

ant6n wrote: post #76
di4na wrote: post #44

As someone that has been working hard in this domain, there is one major problem to this in software. 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. You used to raise that money through other local mittrlelstands. At the Masons lodge. At the local kiwanis or Rotary. But these have closed to young member decades ago…

I dunno. I feel like the first 500K aren’t really the big problem, since growing to, say, a 500M valuation as an upper limit is still quite the upside. Also, non traditional funding options are on the table at that level (some cash from you and family, some equity in your home, perhaps some state funding or loans). I feel like the next rounds may become much more difficult. How can I raise the next 10M, …, 200M if th…

You don't need it as much or have that much problems if you make a profit.

And sorry but as upper middle class, my family cannot fund 500k. 100k max. And young people do not have a home.

Welcome to the real world.

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