From an investor side, what I see is that I'd have to keep my risk the same (these "Mittelstands" have the same chance of succeeding as any other VC backed company) while drastically reducing returns. Why would anyone go for this?
We need a middle class for startups
111–120 of 320 posts
Re: We need a middle class for startups
#112You have funding... it's called nights and weekends. Most founders are "nights and weekends" to scrimp buy for YEARS [3-5?].
Anti-risk, security seeking, founders who think they should get funding in `3 months really haven't assessed "startups" as a profession too well. You get funding when capital has a reason to believe it isn't simply gambling.
"But I have kids and a family". Yep, so do many... and they made it work. Decide if you will.
Re: We need a middle class for startups
#113Am 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.
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?
Simple. Survivorship bias. HBS and other business journals have done many studies where they look at the key attributes of a successful entrepreneur and it's always the usual stuff like: hard work, persistence, willingness to take risks, etc. The problem is that if you surveyed the key attributes of UNsuccessful entrepreneurs you'd find the exact same attributes.
Re: We need a middle class for startups
#114Totally agree with this article. It's not just about funding methods, but also playbooks for these types of businesses, and best practices. I've bootstrapped IPinfo.io to millions in revenue and a team of over 20 - so we're squarely in the "Middle class", and there's a tension between the "bootsrapper advice" (which mostly applies to optimizing for lifestyle and eliminating any risk) and "VC backed advice" (which mos…
Same! I think the middle ground is somewhere between paying dividends or distributions from the revenue and most importantly, becoming comfortable with the idea and ignoring the “growth at all costs” mentality that people (and press) are so attracted to.
Where does this community exist?
Re: We need a middle class for startups
#115Some aspects listed on the wikipedia page:
Family ownership or family-like corporate culture, Long-term focus, Nimbleness, Investment into the workforce, Social responsibility
...are very much feared or despised in SV and, to a lesser extent, in US in general.
Re: We need a middle class for startups
#116Totally agree with this article. It's not just about funding methods, but also playbooks for these types of businesses, and best practices. I've bootstrapped IPinfo.io to millions in revenue and a team of over 20 - so we're squarely in the "Middle class", and there's a tension between the "bootsrapper advice" (which mostly applies to optimizing for lifestyle and eliminating any risk) and "VC backed advice" (which mos…
Your story with IPinfo.io is profoundly compelling; have you written anything about your journey?
> "let's be ambitious and serve a large market and create the best products with great people, but let's run this as a marathon and not a sprint, and let's not risk everything on a big outcome"
This sounds so great.
Re: We need a middle class for startups
#117Totally agree with this article. It's not just about funding methods, but also playbooks for these types of businesses, and best practices. I've bootstrapped IPinfo.io to millions in revenue and a team of over 20 - so we're squarely in the "Middle class", and there's a tension between the "bootsrapper advice" (which mostly applies to optimizing for lifestyle and eliminating any risk) and "VC backed advice" (which mos…
That is why I love SmugMug.
Re: We need a middle class for startups
#118Earlier quoted context omitted.
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 profitabil…
most new businesses in the US are still bootstrapped, usually through a combination of family (non-)wealth, non-professional investment, (small) bank loans, supplier credit, and plain ol' hard labor. most of those will be small businesses, but many will grow to mid-sized businesses. most will not be software businesses. software doesn't have an investment problem. in fact, it's a maturing industry where all the big m…
I had not considered the way crypto/nfts have been commandeered to be a side effect of wealth not being able to be allocated fully anymore. That's an interesting take. I wish there were a way for that kind of wayward money to do some real work improving our communities while it waits for something more profitable to do.
I don't necessarily mind that people are trying to make money with their money, but it is a shame that so much capital is caught up in financial instruments that don't do any real work while it's holding onto it.
Re: We need a middle class for startups
#119Earlier quoted context omitted.
> The key is that Mittelstand businesses are much less likely to fail I think you're getting at the crux of it here. The question is, how does one of these businesses "prove" to investors that they are less likely to fail? The failure rate for new business starts is famously high, whether that business is a tech startup chasing unicorn status or the corner deli. I think this will manifest itself in the due diligence…
I don't have a definitive answer, but I'd venture that that's is something that can be addressed by your pitch, how high you are aiming, etc... Someone who wants to build niche business software vs "the next Facebook" is a good example. The first case has clients outlined, a good estimation of revenue, competition, etc... The second is more abstract but aims higher. Success (albeit highly unlikely) means billions in…
>The first case has clients outlined, a good estimation of revenue, competition, etc... The second is more abstract but aims higher. Success (albeit highly unlikely) means billions in revenues.
It's a stereotype that startups don't have things like estimates of revenue, a clear business plan, clients, etc... A few crazy outliers get all the attention but the vast majority that get funding have a clear and convincing plan to get to profitability, and often clients or at least partner businesses (in other words clients that aren't paying yet, but are willing to spend their own resources working with you).
The problem is that most new businesses fail, so if you're investing in new businesses the winners can't just make you a little money, they have to pay for multiple losers too.
You also need to convince investors that it's worth putting their money into these risky businesses instead of say Microsoft/Apple/Google/Amazon/etc... which will not go out of businesses anytime soon and produce respectable returns.
Re: We need a middle class for startups
#120> Vision: Promote employee stock ownership for American Mittelstands.
I'm especially interested in this last bit and I'm wondering if anyone has any recommendations for learning about the different models people have tried for this.
I have what I can only really describe as a hunch or an instinct (not even a theory at this point) that there's something good for people about owning what they help create.
But I keep getting caught in the brass tacks of it. When I've earned small ownership stakes in companies, the only real way that had any direct monetary value to me was if the company had an exit and I stopped being an owner.
Would some sort of dividend or profit-sharing agreement solve this? Are there long-established means of allowing small-scale owners to profit from their ownership that I've just failed to come across?
The accredited investor laws in the U.S. make it such that most working class people can't buy ownership in private companies, but if they could earn it and profit from that ownership, that seems like a much stronger way of "investing in what they know" and potentially seeing outsized returns rather than just investing broadly in the stock market as it goes up.