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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

#121

Post by simulate-me »

smeej wrote: post #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 ge…

Middle-sized companies usually pay dividends because that’s how the profit is moved from the business to the owners. Unlike many public companies that focus on stock growth as the main driver behind of providing shareholder value.

Re: We need a middle class for startups

#122

Post by sgift »

bradleybuda wrote: post #98
thanedar wrote: post #68

Earlier 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…

> 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 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?

By having a business plan. That's why banks (at least over here in Germany) ask for one when you ask for a loan. You present a plan, someone reads it, you talk it through, clarify a few things and if everyone is happy they give you a loan and you start (or grow) your business with it.

Re: We need a middle class for startups

#123

Post by achillean »

coderholic wrote: post #103

Totally 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…

I'll second the lack of information about playbooks/ running a middle-class company. It's a bit frustrating that everybody assumes you want to follow the VC model. Probably the most common question I get is when I'm going to sell the company - not realizing that we're a profitable company that doesn't need an exit. I also think middle-class companies are under-reported on. I have to assume that there are a lot of companies like us but it's not as sexy of a story: slowly and steadily building a successful business.

Re: We need a middle class for startups

#124

Post by bityard »

julianeon wrote: post #80
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.

Is Berkshire Hathaway a lifestyle business? Because it started out as one. That’s his point. Small businesses can become unicorns - but they need space and time to grow. We need a better environment, and a more nuanced understanding, of them.

> Is Berkshire Hathaway a lifestyle business? Because it started out as one.

My skept-o-meter went off-scale upon reading this. Can you point to exactly when BH was a lifestyle business and what they were doing at that point that would classify them as a lifestyle business?

Re: We need a middle class for startups

#125

Post by limedaring »

michaelbuckbee wrote: post #92

This post is describing a structural issue on the funding side of new ventures: - - bootstrapping is very hard - traditional credit/loans aren't structured well for the "mid" type risks of starting software businesses (not much collateral) - and on the VC side there is much less opportunity for the Unicorn 1 in 10 exits. Tackling this problem are two funds that I didn't see mentioned in either the article or the comm…

Tracy here from TinySeed, thanks for linking to our thesis!

Point of clarification: we don't do profit-sharing. Instead, we are equity owners. So when a company gets to the point of success where they want to take money off the table, they can issue dividends (and TinySeed get's a pro-rata amount of those dividends). I find this is one of our most unique points and aligns the incentives of the founder with TinySeed.

As mentioned in that page, by investing broadly into B2B SaaS, we can succeed as a venture firm without needing to count on unicorn exits. We're about to back our 80th company, and our founders tend to be older, more likely to have families, and tend to be "unsexy" businesses. We're only a few years old, but we've had very promising results (as a VC firm) so far.

Re: We need a middle class for startups

#126

Post by rglullis »

teucris wrote: post #108
rglullis wrote: post #72

Earlier quoted context omitted.

Oh, come on. You are putting one third of the economy as "lifestyle businesses"? How many fast food franchises make less than that per year, are they "lifestyle businesses"? Seriously, please get out of the SV bubble.

My interpretation of the comment was that tons of business are just clumped into the “lifestyle” category just because they don’t aim to maximize valuation.

> are just clumped into the “lifestyle”

By whom?

Re: We need a middle class for startups

#127

Post by passivate »

seibelj wrote: post #8
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.

Local banks can provide the capital, often collateralized by your house. Also small business loans from the government and accelerator awards can provide 6 figure amounts. I know some "generic" business people who are fairly wealthy and they own things like food franchises and apartment complexes. There are many paths to becoming rich that don't involve VCs and billion dollar exits. 99% of entrepreneurs don't talk to…

With the recent emphasis on remote work, you can hire from the global talent pool. The US labor market is indeed very expensive.

Re: We need a middle class for startups

#128

Post by formerkrogemp »

Unpopular opinion: Paul Graham and a generation of startups with Silicon Valley magical thinking has inculcated this belief that startups are the solution to everything. Don't get me wrong: startups have their place, but they're no panacea. Most of our problems are political and, more and more often now and moving forward, environmental.

But, yes, opening up funding to people of different socioeconomic backgrounds at different "risk" levels might lead to more innovation and entrepeneurship. So would a population of citizens who don't have healthcare tied to their job, childcare tied to their location or reliant upon wealth, and so forth. People who don't have to worry about bankruptcy due to an accident or disease, and people who can have their children taken care of during the day while they're off starting a company can focus more on a company and less on the risk of failing in everything else.

Re: We need a middle class for startups

#129

Post by scarface74 »

treeman79 wrote: post #93
scarface74 wrote: post #30

Earlier quoted context omitted.

My question is why does everyone with the next CRUD SaaS app think they need to hire the “best people”? I’ve seen plenty of job openings where companies want “ninja rockstar 10x developers” to write what ends up being something that anyone who knows the latest MVC framework with three years of experience can do competently. And most “entrepreneurs” who own franchising are barely middle class and “bought a job”. The a…

A 10x programmer can get things off the ground very fast. Back at my peak. Me and another guy got a new startup to 1,000 paying clients in b2b space in 2 years. We had a few “regular” guys that helped out, but they would have taken 20 years to do what we did.

I consider myself a “regular guy” (and 80% of drivers think they are above average). But I believe I can go through my LinkedIn profile and find a bunch of “regular guys” that I’ve worked with through the years that if you combine us with a “product guy”, an empty AWS account and a budget. We could put together a standard SaaS app.

Re: We need a middle class for startups

#130

Post by bityard »

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.

Do you believe that all successful people were simply lucky?
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