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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

#171

Post by coderholic »

Etheryte wrote: post #149
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…

Isn't what you're describing just running a regular company?

No, I actually think it's much more closely aligned with a VC business than a regular business. It's just a more "regular business" approach towards it. That is, it's still serving a large market, creating a competative advantage (which "regular businesses" rarely have), has compounding growth - it just doesn't need to rush to make it all happen in a few years in a very high risk way.

Re: We need a middle class for startups

#172

Post by adamqureshi »

Yes.100% with that this guy said. I have a 1 man shop marketplace startup. I been at it since 2016. I have to literally figure shit out on the fly. I can't afford a full time engineering time ( i have a pay for play engineer). I pay for the platform from the sales i make. I have no goals to raise VC. I am under no illusion of raising series ABCDFU. My goal is to make sales and put food on the table for me and my family. For me, as a 1 man shop. Surviving IS Succeeding. I am very happy being a thousandaire. techCrunch will never write about me or my start up. So if you have an idea, build it and start testing. your #1 goal should be making sales / money ASAP. Thats it. Do not fall in to the trap of I have an idea i will raise funding and i will exit making billions. That is NOT reality / real world. What you read on techcrunch is not reality, those unicorns are very rare. Good lucky out there. Make sales. Charge money.

Re: We need a middle class for startups

#173

Post by lumost »

I suspect that there is a self full-filling prophecy for VC funding. If you aim small (read 50-500 million dollar business), then odds are a DecaBillion dollar business will eat your lunch sooner or later.

The only middle ground would appear to be in businesses which serve defensible tight niches, but in software these mostly appear to boil down to consultancies with a small set of customers.

Re: We need a middle class for startups

#174

Post by gumby »

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…

These deals work for smaller funds with fewer staff. The current situation stems from the giant funds. Not so long ago most A rounds were a couple of million or less.

Re: We need a middle class for startups

#176

Post by jrochkind1 »

ehnto wrote: post #118
clairity wrote: post #105

Earlier quoted context omitted.

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…

> 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.

If I point out that Marxist economic theory talks about a "crisis of capital accumulation" where capitalists (meaning those with capital to invest) don't have enough places to invest their capital succesfully, and that this is related to "financialization" as a method of opening new places to put capital (also in some circumstances "imperialism"), and that in different periods this can go up and down... in the past I usually get down-voted.

Re: We need a middle class for startups

#178

Post by tptacek »

bombcar wrote: post #165
tptacek wrote: post #40

I'm a fan of bootstrapped companies and have started and operated a couple of them, sometimes quite successfully. But I don't understand how the economics of funding them are supposed to work. VC is a star-search business. Most businesses fail, and that includes businesses run conservatively with organic growth. In a portfolio like that, the winners have to pay for the losers, or the math just doesn't work.

I think one thing that can help is many businesses (we read about them on HN all the time) are "successful" and could be $1m, $10m, even $100m/yr - but they have to be pushed to $1b/year or more to satisfy the ICs. Somehow to allow them to "exit" at 1/10/100 instead of trying for 1b or crash would be nice. But it would need a different type of "VC" partner. One funding mechanism could be something akin to "guilds" -…

Again: the winners have to pay for the losers. The unusually large successes are what makes the model work. I'm sure they're pushed past the point where they need to go to be economically viable, but by the time you've reached that scale, you're already out of the "mid-market" bracket.

Re: We need a middle class for startups

#179

Post by TuringNYC »

czbond wrote: post #106
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…

No founders are paying themselves $250k/each/yr until MANY rounds of funding in. If you get seed/angel funding, you'd be paying yourself like $40k in the U.S. if at all. Founders take a lot of risk too, not just "play with funding money earning a job salary"

My post noted that founders working for themselves are essentially contributing the equivalent to hiring someone at $250k/yr.
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